Bitcoin rises above $80,000 after the US elections

Bitcoin surpassed $80,500 after touching $75,618 hours earlier as markets digested the Democratic victory in the US midterm elections. This recovery does not necessarily reflect support for the political result: it above all reflects the disappearance of an uncertainty which paralyzed buyers.

Bitcoin erases its electoral fall in a few hours

Bitcoin first fell during the counting, when the Democrats’ victory in both houses of Congress became clear. The price hit its lowest level in seven weeks at $75,618, before rising towards $78,000 during Asian trading.

The movement accelerated when Wall Street opened. THE BTC crossed 80,000 dollars and gained more than 4% on the session. From its overnight low to its high near $80,500, the rebound reached around 6.5%.

This rapid recovery was accompanied by several changes:

• The electoral results have ruled out the risk of a prolonged counting;
• S&P 500 futures rebounded from three-month low;
• The US dollar fell against the major currencies;
• Bond yields have fallen slightly;
• WTI oil fell below $93 per barrel.

US stocks followed a similar path. S&P 500 futures first fell to 7490 points before rising towards 7690 points. Kobeissi Letter called this initial decline “classic bear trap”.

The decline in oil also supported risky assets. Investors hope the election result will encourage a resumption of negotiations in the war between the United States and Iran.

Cheaper energy would reduce inflationary pressures and limit the need for further rate hikes.

The end of political uncertainty revives the appetite for risk

The Democratic victory could, however, complicate the pro-crypto agenda carried by Donald Trump. The new Congress could slow down texts intended to clarify the status of cryptos or to reduce the constraints imposed on companies in the sector.

The market nevertheless preferred institutional certainty to the political composition of Congress. Investors especially feared a close result, disputes or several days of waiting likely to fuel volatility.

The reaction confirmed a principle frequently observed in the markets: expected bad news can be better received than prolonged uncertainty. Kelly Ye, head of research at Talos, also estimated that the result was largely integrated into the courses. Bitcoin moved about 1.7% after the polls closed, almost as much as the 1.8% expected by the options market.

The crypto sector had also prepared the ground politically. His companies spent more than $300 million during the current and previous election cycles, supporting crypto-friendly candidates in both parties. Democratic victory therefore does not automatically mean a return to hostile politics.

James Butterfill, head of research at CoinShares, however, advises not to overestimate the effect of the vote. “For Bitcoin, real rates, dollar liquidity and ETP flows remain more important than elections”he explains.

The return of institutional investors remains to be confirmed

Weak institutional flows constitute the main obstacle to a sustainable recovery. US bitcoin ETFs saw $115.6 million in net outflows on November 3, following $398.6 million the day before and $643.3 million on October 30.

Cumulative withdrawals thus reach nearly 1.16 billion dollars over three sessions. Their pace, however, slowed down significantly: daily outings were divided by more than five between October 30 and election day.

Data from November 3 do not yet allow us to assess investors’ reaction to the election result. The markets had closed before the announcement of the Democratic victory. The flows on November 4 will therefore constitute the first real test of institutional confidence after the election.

Vikram Subburaj, managing director of Giottus, estimated that maintaining above $78,000 despite withdrawals would show that other buyers are absorbing the supply. A simultaneous return of entries into ETFs would, on the other hand, give “more solid foundations” to movement.

The area between $80,000 and $82,000 now becomes decisive. Its lasting recovery, accompanied by spot purchases and positive institutional flows, would transform the rebound from relief into a more credible recovery. Without this confirmation, the market could simply have closed the electoral parenthesis before returning to its concerns about rates, platform security and American demand.