As Republican candidate Donald Trump, who is pro-cryptocurrency, sees his election odds decline in the betting markets, the momentum for Bitcoin to hit record highs is waning.
On Friday (November 1), Bitcoin fell below $69,000 in Asian trading, following a 4% decline in the U.S. market—the largest drop in about a month. This pullback is associated with Trump's narrowing lead in election betting markets like PredictIt, Polymarket, and Kalshi, as Democratic candidate and Vice President Kamala Harris gradually closes the gap with Trump.
Bitcoin is referred to as the 'Trump trade' because the former president closely supports the cryptocurrency industry, which invested heavily during the campaign to promote its agenda. Earlier this week, Trump had a significant lead in the prediction markets, and Bitcoin was also nearing its historical high of $73,798 set in March, just $234 shy.
Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC, wrote in a report that Bitcoin's testing of the $70,000 level again may be due to "Trump's momentum stalling and potential risk aversion ahead of the election."
Cryptocurrency Capital
Trump envisions America as the global hub for cryptocurrency, while Harris has promised to support a regulatory framework for the industry in a robust manner. These two positions sharply contrast with the current Biden administration's crackdown on the industry.
As the stock market fluctuates due to cautious sentiment ahead of the election and expectations for next week's Federal Reserve meeting, Bitcoin prices also fluctuate. Federal Reserve officials are expected to cut rates again at the November meeting and provide clues about future policy directions.
Due to controversies over information value and potential manipulation, prediction markets have been highly controversial. Polls indicate that as the election date of November 5 approaches, the campaign situation is quite tense.
"If Harris wins the election, Bitcoin may decline, but the reaction to Trump's election is harder to predict." Ed Yardeni of Yardeni Research Inc. wrote in a report, "Bitcoin may continue to rise or fall in a 'buy the rumor, sell the news' scenario due to its year-to-date gains."
Notably, Arthur Hayes, founder and former CEO of Bitmex, recently published a blog post predicting that China's quantitative easing measures could trigger a dramatic Bitcoin rally. Hayes believes that China's massive monetary intervention, aimed at revitalizing its banking and real estate sectors after a historic property collapse, will ultimately drive up Bitcoin prices.
Hayes explains that China's real estate crisis and the subsequent reflation policies have laid the groundwork for unprecedented credit expansion, and he predicts that this credit will indirectly flow into the Bitcoin market.
"This means that when China revitalizes its banking system and real estate sector, Bitcoin will soar on a long-term basis," he wrote. "Given that China's real estate bubble is the largest in human history, the amount of renminbi credit created will be comparable to the total amount of dollars printed by the U.S. to address COVID in 2020-2021.
