AFTER generally underperforming Bitcoin during much of this year, smaller cryptocurrencies such as Doge and Solana may end up having the most at stake following the conclusion of the US presidential election.
Bitcoin rose as much as 5.1 per cent to US$70,537 on Tuesday (Nov 5), or less than 5 per cent below the record high of around US$73,800 reached in March. The largest cryptocurrency by market value has gained more than 65 per cent this year.
Doge jumped as much as 18 per cent, bolstered in part by comments by long-time supporter Elon Musk about launching a Department of Government Efficiency, or D.O.G.E., if Donald Trump wins the election. The token, which trades at around 17 US cents, has almost doubled in 2024.
“For Bitcoin, the election does not matter much,” said Zaheer Ebtikar, founder of crypto fund Split Capital. “For altcoins, they may not recover as much if Kamala Harris wins. They are the biggest winners or losers of the election.”
Altcoins, which refers to the cryptocurrencies that are smaller than Bitcoin, tended to perform better in the past up market cycles, especially with investors rotating to the small-cap coins after major Bitcoin rallies. But in the past year, altcoins in general have struggled to outperform Bitcoin, with the exception of so-called memecoins, which are coins without any utility. Dogecoin is considered by many as the original memecoin.
Ebtikar added that a Harris win could mean more regulatory crackdown on the crypto industry, while Bitcoin and Ether may survive since the two coins are considered as more decentralised than other coins. During campaigning, Republican nominee Trump took a strong pro-crypto stance, when Democratic rival Harris pledged to back a regulatory framework for digital assets. The crypto supporters have largely agreed that a Trump win would be much more beneficial to the crypto industry.
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Other traders argued that the result of the election overall will be a good event for the crypto market.
“Medium term, we think markets are headed higher regardless of who wins, as we move past the elections and back to macro and the Fed,” said Shiliang Tang, president of principal trading firm Arbelos Markets.
Crypto options point to a spike in short-term volatility across the asset class ahead of the election results. Big swings in Bitcoin prices are set to trigger bouts of liquidations due to leveraged positions, analysts said.
“The market is heavily exposed, and extremely sensitive to the election outcome,” Vetle Lunde, head of research at K33 Research said in a Nov 5 report. “In the very short term, a Harris win is due to push prices lower, as traders are far from sufficiently de-risked. With that said, we expect this reaction to be short-lived, as cleared uncertainty and an expansionary macro environment are factors due to support strong momentum by year-end.”
Bitcoin options expiries around the election remain heavily bid with pricier puts and the calls seeing strike prices that are much higher than the current price, according to data compiled by Deribit, the largest options exchange. That makeup suggests a divergent view on the election result with more traders hedging against a Harris win while others continue to make bullish bets on Trump. The increase in put premiums can also be attributed to hedging. BLOOMBERG
