With the impending U.S. presidential elections, Bitcoin prices have been responding more to systematic political shifts, especially the odds of elections in favour of Donald Trump. Not long ago, Bitcoin’s performance improved considerably, coming close to an all-time high, followed by a sharp decline.
On November 3, Bitcoin price fell back below the $68,000 threshold after reaching almost $73,000 earlier that week, marking a value correction of greater than 3%. This correction, however, appears to have been caused by changes in the perceptions towards Trump’s returning to power.
Prediction Markets Signal Changing Odds for Trump
Over the last week, trend setting bets have moved on prediction markets, Polymarket and Kalshi focusing on Trump’s chances. Early in November, his odds plummeted to 54%, further down from the 67% records just a few days earlier. Trump has presented himself as a pro-crypto supporter and has guaranteed that the United States will become a centre of the crypto world with the support of proper regulations for digital currencies.
Consequently, any alteration in his political fortunes seems to be having an impact on investor sentiment in the digital asset space. With Trump’s predictions worsening, the apparent caution of the investors seemed to increase – resulting in higher levels of market liquidations, of which more than $315 million worth of crypto positions were liquidated in one day alone. Most of such liquidations were long positions, highlighting the extent of bearish sentiment in traders as the elections draw closer.
Investor Caution and Market Liquidations Rise
This apparent correlation between the likelihood of Trump’s election and the performance of Bitcoin has been the subject of some specialists’ comments. Sean Farrell from Fundstrat Global Advisors has noted that the recent decline of Bitcoin has coincided with what he referred to as Trump’s “stalling momentum” in the polls. He further hinted that, probably due to ongoing political uncertainties, the more prudent approach may have been taken by many investors by profit-taking or re-allocating their portfolios in order to avoid the effects of higher expected levels of volatility.
Dr. Emily Carter, who works as a blockchain analyst, advised that such patterns should not be taken literally. The idea that political developments affect the price of cryptocurrencies is often the case, she remarked, “but due to Bitcoin’s inherent instability, it is not practical to fix political outcomes to price changes. Instead, she emphasized the importance of external economic conditions and market psychology in explaining how the market operates.”
The Political Connection in Bitcoin’s Price Fluctuations
These developments show the strategic risk management to investors in cryptocurrency, especially in recent times. Due to the volatility caused by the elections, experts advise the use of approaches such as dollar cost averaging and hedging that help to share risks and reduce losses during such periods. It is also very important to monitor factors such as politics and the markets since these are likely to affect the price of Bitcoin.
To conclude, the recent drop observed in Bitcoin’s value following a decrease in the election odds of Donald Trump accentuates the political connections of cryptocurrency. As the election date of November 5 draws closer, it is anticipated that more fluctuations and therefore will characterize investor behaviour, and one should be ready to cope with such volatility. Because the confidence of investors in digital assets is affected by the regulatory regime and political developments, there is a need to appreciate these factors in formulating investment approaches in the fast-changing market.
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