4 December 2024

US Presidential Election Expected to Increase Bitcoin Market Volatility

As the US presidential election approaches, Bitcoin (BTC) faces increased market volatility, trading below $69,000 after being rejected near its all-time high of $73,777.

Bitcoin (BTC) is experiencing a downturn, trading below $69,000 after a brief flirtation with its all-time high of $73,777 last week. As the US presidential election approaches, analysts are predicting heightened market volatility, which could lead to a familiar "sell-the-news" reaction reminiscent of the Nashville Bitcoin conference.

The crypto community appears to have a slight preference for former President Donald Trump, whose pro-crypto stance may influence market dynamics. This preference adds complexity to predictions surrounding Bitcoin's price movements leading up to the election.

Recent analysis from Santiment, a cryptocurrency analytics platform, reveals that spikes in social media mentions of political candidates often correlate with market rallies. Trump, in particular, has dominated discussions on social media, potentially impacting crypto prices as the election draws near. The Santiment social trends tool indicates that Trump's mentions significantly outpace those of Vice President Kamala Harris, suggesting a connection between his media presence and market activity.

As the election results are set to be announced this week, crypto traders, especially Bitcoin whales, are preparing for unexpected outcomes. Data shows that BTC whales have reduced their transfer volumes since last week, with a notable spike occurring near the peak price of $73,620 on October 29. These fluctuations in whale transactions are often reliable indicators of potential price reversals in the cryptocurrency market. However, it's crucial to understand that whale inactivity does not automatically imply a price drop; rather, it may indicate their anticipation of market reactions to upcoming events.

A recent report from QCP Capital emphasizes that the presidential election is likely to trigger another sell-the-news event. While Trump has been favored as a potential President, betting odds have shifted from a high of 66% to 57% for Trump and 43% for Harris. Regardless of the election outcome, analysts believe it will mirror the sell-the-news reaction observed during the Nashville Bitcoin conference.

This election is poised to have a more significant impact on crypto markets than previous ones. According to a Grayscale report, over a third of voters express interest in learning about or purchasing various crypto assets. Additionally, nearly half of likely voters believe that crypto, blockchain, and automated technologies represent the future of finance.

Bitcoin faced rejection around its all-time high of $73,777 on October 29, subsequently declining by 5.44% over the following five days, closing below the critical $69,519 level on Friday. As of Monday, BTC continues to trade slightly lower at around $68,600. If this downward trend persists, Bitcoin may retest the psychologically significant level of $66,000.

Technical indicators also suggest a bearish outlook for Bitcoin. The Moving Average Convergence Divergence (MACD) indicator signaled a bearish crossover on Sunday, with the MACD line dipping below the signal line, indicating a sell signal. Additionally, the Relative Strength Index (RSI) is currently at 54 and trending downward, approaching the neutral level of 50. A daily close below this level could indicate increasing bearish momentum and further pressure on Bitcoin's price.

On the other hand, if Bitcoin manages to break and close above the $69,519 level (the high from October 21), it could pave the way for a retest of its all-time high at $73,777.

Source: FXStreet