Bitcoin price may drop before the US presidential election on November 5, with increased volatility expected afterward, says Geoff Kendrick of Standard Chartered. Kendrick notes that bitcoin reached $73,563 on Tuesday but has not broken its all-time high of $73,700 set on March 14. Pre-election position liquidations could drive prices lower, making a breakout less likely.
“There is a risk of pre-election position unwinding, meaning that we are more likely to be lower than $73,000 than higher, come election day,” Kendrick warns.
Kendrick also notes that the seven-day bitcoin options premium over the 30-day premium will likely continue to rise due to the uncertainty surrounding election results, which may take a few days to be fully announced. “This is due to the chance that it takes a few days to get full election results,” Kendrick explained. He also drew parallels between this trend and the volatility seen in early January preceding the bitcoin exchange-traded fund launch, highlighting the options markets’ ability to predict volatility around significant events.
Kendrick believes that if the Republicans secure a majority in the US Congress, bitcoin price will experience a more substantial shift, potentially reaching $125,000 by the end of the year and sparking a renewed altcoin season. Specifically, Kendrick thinks a Republican sweep would significantly benefit Solana, saying, “We think a Republican sweep would be especially helpful to Solana in this regard”.
With the US election approaching, bitcoin’s value may face volatility and a potential pullback, but what factors contribute to this prediction?
Read Also: What is really behind Solana’s emergence as the leading blockchain ecosystem in 2024? Read Also: Crypto market faces $900 million liquidation as Bitcoin retreats to $65k ahead of the halving.
Historical Context: Bitcoin and US Elections
At the time of writing, bitcoin trades at $69,600, reflecting a 0.6% decrease in the last 24 hours. Historically, Bitcoin has shown a strong correlation with the S&P 500, particularly during bull cycles and periods of risk-on sentiment. The potential for post-election growth is bolstered by historical trends, which suggest that the S&P 500 has consistently performed well following US presidential elections, with significant gains in the year following an election. This pattern has held true for the past few decades, with only one year experiencing negative returns twelve months after election day. Read Also: How Mt. Gox’s Bitcoin Transfer Could Impact the Cryptocurrency Market
Analysis of 2012 US elections’ effects on bitcoin
In 2012, Bitcoin was still in its infancy, with a market capitalization of just over $100 million. During the US presidential election between Barack Obama and Mitt Romney, Bitcoin’s price hovered between $10 and $12. At that time, the broader financial markets were focused on traditional assets, and the correlation with events like elections was minimal. Bitcoin user base consisted mainly of enthusiasts and beginners in niche online communities. The market lacked liquidity and institutional participation, making it relatively unaffected by the US election. In fact, Bitcoin’s price rise from $5 in January to over $13 in December 2012 was driven more by growing interest in the digital asset than any reaction to the election outcome. Interestingly, 2012 marked the beginning of bitcoin’s journey to greater recognition. Although it was still a relatively unknown entity, this period laid the groundwork for its future growth in the financial world. The year also saw significant events, such as bitcoin’s first halving, which reduced the block reward from 50 bitcoins to 25 bitcoins, and the creation of the influential Bitcoin Foundation. Read Also: Bitcoin Search Hits Lowest Point: What does this mean to the investor?
Analysis of 2016 US elections’ effects on bitcoin
The 2016 US presidential election was a game-changer for bitcoin. When Donald Trump won, the global financial markets were filled with uncertainty, which surprisingly benefited Bitcoin. At the time, bitcoin price was stable, hovering between $700-$800, with a market capitalization of over $12 billion. Following Trump’s victory, bitcoin price skyrocketed, reaching almost $1,000 by the end of 2016. This surge was largely driven by concerns over the new administration’s economic policies and growing interest from institutional investors. As a result, Bitcoin became increasingly recognized as a hedge against geopolitical risk and economic uncertainty, leading to a sharp increase in demand. The rising price of bitcoin was also fueled by increasing awareness and the introduction of blockchain pilots by major financial institutions. This marked a significant turning point in bitcoin’s history, solidifying its position as a speculative asset that benefits from market uncertainty. Read Also: Oversold Bitcoin Territory: Is bitcoin due for a bounce or further decline?
Analysis of 2020 US elections’ effects on bitcoin
The 2020 US presidential election between Joe Biden and Donald Trump took place during a unique time, marked by the COVID-19 pandemic and unprecedented economic uncertainty. Bitcoin price was around $13,000 with a market capitalization of over $240 billion at that time. The election’s uncertainty affected financial markets, causing bitcoin price to fluctuate between $13,000 and $15,000 during election week. However, the most significant movement occurred after the election, with bitcoin experiencing a historic rally of almost $20,000 by the end of December 2020. This surge was fueled by unprecedented fiscal stimulus measures, which raised inflation fears and increased institutional adoption of bitcoin as a savings vehicle. The 2020 elections solidified bitcoin’s reputation as an asset class that benefits during economic turmoil, marking a departure from its relatively soft reaction in previous elections. Bitcoin’s growing acceptance as an asset class was further evidenced by companies like MicroStrategy and Square adding it to their balance sheets. This shift highlighted bitcoin’s potential as a speculative asset and hedge against traditional financial risks, demonstrating its increasing influence in the financial world. Read Also: Creditor Repayment Speculation Sparks FTT Frenzy: Token’s Price Reaction and Market Sentiment
Factors Contributing to Potential Pullback
Standard Chartered’s prediction suggests that bitcoin’s price may drop before the US presidential election on November 5, with increased volatility expected afterward. Three key factors contribute to this potential pullback:
- Market Sentiment and Investor Uncertainty: The uncertainty surrounding election results, which may take a few days to be fully announced, is likely to drive up the seven-day bitcoin options premium over the 30-day premium. This uncertainty can lead to pre-election position liquidations, making a breakout less likely and potentially driving prices lower.
- Regulatory Environment and Potential Policy Changes: The outcome of the election could lead to changes in regulatory policies, impacting Bitcoin’s price. For instance, if the Republicans secure a majority in the US Congress, Bitcoin’s price may experience a more substantial shift, potentially reaching $125,000 by the end of the year.
- Global Economic Trends and Macroeconomic Factors: Bitcoin has historically shown a strong correlation with the S&P 500, particularly during bull cycles and periods of risk-on sentiment. The potential for post-election growth is bolstered by historical trends, which suggest that the S&P 500 has consistently performed well following US presidential elections.
Historically, Bitcoin’s price has followed a predictable pattern during US presidential elections, with a significant dip approximately 2-3 months before the election, followed by a bullish rebound after the election. If this pattern holds true, bitcoin price may experience a significant increase after the 2024 election. Read Also: USDT Tether’s $120B Milestone: A Bullish Signal for the Crypto Market?
Implications for Investors and Traders
With the US presidential election just around the corner, investors and traders are bracing themselves for potential price fluctuations in Bitcoin. To navigate these uncertain waters, it is crucial to have a solid strategy in place.
Strategies for Navigating Potential Price Fluctuations
- Diversification: Spread your investments across various asset classes to minimize risk.
- Hedging: Consider using options or futures contracts to protect against potential losses.
- Stop-loss Orders: Set price triggers to automatically sell assets if they fall below a certain value.
Risk Management Techniques
- Market Sentiment and Investor Uncertainty: Keep an eye on market sentiment and adjust your strategy accordingly.
- Regulatory Environment and Potential Policy Changes: Stay informed about potential policy changes and their impact on Bitcoin’s price.
- Global Economic Trends and Macroeconomic Factors: Monitor global economic trends and their influence on Bitcoin’s price.
Potential Buying Opportunities and Long-term Prospects
If historical trends hold, bitcoin price may experience significant gains after the election. Some predictions suggest that bitcoin price could rise to $1,000,000 or more if it follows the same percentage gains as in 2012. Additionally, a Republican sweep in the US Congress could lead to a more substantial shift in bitcoin price, potentially reaching $125,000 by the end of the year. However, it is important to understand the risks involved and keep expectations in check, as bitcoin only has a 16% chance of hitting $100,000 in 2024. If you believe in Bitcoin’s long-term investment thesis, consider consulting with a financial advisor and diversifying your portfolio to minimize risk. The time to act is now – will you take the leap and invest in Bitcoin before the election, or wait and see how the market unfolds? Read Also: The ‘Tug-O-War’ on Exchanges: A Technical Analysis of Bitcoin Price Action
Solomon Victor is a Technical Analyst who is also knowledgeable about various aspects of blockchain and cryptocurrency.
