Bitcoin approaches record as traders narrow odds of Donald Trump victory in US election

Bitcoin approached a record as traders around the world watched results trickle in from a US presidential election that pits digital-asset supporter Donald Trump against Kamala Harris, who served as Vice President during a government crackdown on the industry.

The original cryptocurrency rose 5.3 per cent to $US72,840 on Wednesday morning, less than 2 per cent below its March record set during the euphoria that followed January’s launch of US spot-Bitcoin exchange-traded funds.

“It has to be because the early numbers are looking good for Trump,” said Fredrick Collins, chief executive and founder of crypto data platform VeloData.

“Bitcoin is one of the top instruments for trading the election tonight in my opinion. It’s relatively liquid and very tied to the outcome. So it’s pretty safe to assume any increases in price are tied to increases in Trump’s prospects of winning.”

Bitcoin’s more than 60 per cent advance in 2024 has topped traditional assets such as global stocks and gold.

Crypto muscled onto the high table of politics courtesy of a giant campaign-finance war chest funded by the industry to further its agenda. Bitcoin is viewed by some as a so-called Trump trade because Republican presidential nominee Trump embraced digital assets during his campaign.

Trump staked out ground as the candidate most-friendly to the industry by vowing to make the US the crypto capital of the planet, create a strategic Bitcoin reserve and appoint regulators who love digital assets should he return to the White House. The former president has bolstered his support among crypto enthusiasts by launching his own projects. Harris has adopted a more measured approach, pledging to support a regulatory framework for the industry.

Volatility expected

Traders were bracing for potentially pronounced market volatility stemming from results of an election that polls show is a dead heat.

The 30-day gauge of implied Bitcoin swings reached the highest level since political upheavals, including President Joe Biden’s exit from the race, roiled investors in July. The index, compiled by CF Benchmarks, is derived from CME Group Bitcoin options pricing.

The options market was signalling expected moves of about 8 per cent in either direction the day after the vote, compared with a typical 2 per cent rise or fall on a normal day, said Caroline Mauron, co-founder of Orbit Markets, a provider of crypto derivatives liquidity.

Investors in spot-Bitcoin ETFs investors took chips off the table a day before the election, with the 12 funds seeing a record outflow of $US579.5 million on Monday, according to data compiled by Bloomberg.

Prior to the election taking over the focus of the market, the price of Bitcoin was lifted this year by strong flows into the ETFs. Funds from issuers such as BlackRock and Fidelity Investments have attracted about $US23.6 billion of net inflows this year, data compiled by Bloomberg show. The SEC grudgingly approved the funds after a court reversal in 2023. Their launch was one of the most eagerly anticipated events in digital-asset history.

Industry expectations

Crypto-industry executives are optimistic that either of the candidates’ position toward digital assets would be in sharp contrast to the crackdown on the sector under President Joe Biden that saw numerous companies hit with enforcement actions from the SEC.

Digital-asset companies often complain that officials under the Biden administration chose a path of regulation through enforcement rather than creating a clear new legal framework for the nascent market.

SEC chair Gary Gensler is a critic of the industry’s alleged non-compliance, repeatedly labelling the sector as rife with fraud and misconduct. The agency cracked down on crypto following a 2022 market rout and collapses such as the bankruptcy of Sam Bankman-Fried’s fraudulent FTX exchange.

Bloomberg