The final stretch of the U.S. presidential election is keeping traders on their toes after recent big runs higher for crypto and traditional markets.
Growing uncertainty around the result of next week's U.S. presidential election could be pushing crypto lower just days after bitcoin (BTC) came within a few dollars of hitting a new record high. Bitcoin has slumped 1.9% in the last 24 hours and is currently trading at $70,600. Meanwhile, the CoinDesk 20 — an index of the 20 largest cryptocurrencies by market capitalization except for stablecoins and exchange coins — is down 3.9% over the same time frame, led by ether (ETH) bleeding 5.3%.
Bitcoin Down 1.9% as Election Uncertainty Looms
Bitcoin is down 1.9% in the last 24 hours, but the broader crypto market has suffered a far deeper decline. This decline comes amidst growing uncertainty around the result of next week's U.S. presidential election. The recent slump in bitcoin could be attributed to profit-taking as well, as the cryptocurrency had experienced a strong upward momentum, rising 22% in just 20 days.
Impact of Election Uncertainty on Crypto Market
Markets move for all sorts of reasons, but some market watchers are attributing the crypto slump to shrinking odds for a victory for crypto-friendly GOP candidate Donald Trump. On crypto betting site Polymarket, Trump's chances of winning tumbled to just 61% on Thursday from 67% 48 hours earlier. The victory odds for Democrat Kamala Harris have surged to 39% from 33%.
Alternative Factors Affecting the Crypto Market
Not everyone is convinced that the U.S. election is the sole reason for the recent crypto slump. Quinn Thompson, founder of crypto hedge fund Lekker Capital, suggests that traders have been looking at other factors such as tech earnings, tensions between Iran and Israel, and the rise in U.K. gilt yields following the government budget rollout.
Trump's Polymarket Odds Impacting Bitcoin
Trump’s Polymarket victory odds have also taken a beating and are now trading at 61 cents, compared to 67 cents on Wednesday. The decline in Trump's victory odds on Polymarket has had a negative impact on bitcoin, as traders view a Trump win as more favorable for the cryptocurrency market. However, despite the decline in equity prices, bitcoin has been performing relatively well.
Stock Market and Crypto Market Correlation
The recent decline in broader traditional markets, with the Nasdaq off 2.4% and the S&P 500 down 1.6%, has been impacting the crypto market as well. Brian Rudick, director of research at crypto trading firm GSR, acknowledges that Trump's Polymarket odds are weighing bitcoin down, but believes that the top cryptocurrency is behaving "very well" considering the decline in equity prices.
Profit-Taking or Mean Reversion?
Traders could simply be profit-taking after strong momentum pushed bitcoin up 22% in 20 days, and Trump's Polymarket odds from 47% to 67% in a little over a month. The recent decline in bitcoin and other cryptocurrencies could be a result of mean reversion, as traders take profits and balance their portfolios ahead of the election.
Conclusion
The recent slump in bitcoin and the broader crypto market can be attributed to a combination of factors, including growing uncertainty around the U.S. presidential election and profit-taking after a strong upward momentum. While Trump's Polymarket odds have declined, bitcoin has been performing relatively well considering the decline in equity prices. Traders are cautious in the final days leading up to the election, and these market movements may be subject to noise. As the election results unfold, it remains to be seen how the crypto market will react and whether it will regain its upward momentum.