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The price of Bitcoin (BTC) jumped 2% in just 30 minutes just as the US stock market rang its opening bell on November 3.. During the pre-market, the Dow Jones rose more than 350 points on US Election Day, causing enormous volatility.
The four reasons that likely led to a Bitcoin bullish trend in such a short period are elections, a rally in equities, negative funding and rising currency outflows.
Bitcoin time chart. Source: TradingView.com
Elections trigger volatility
The US elections are today, but the result is not a foregone conclusion. Polls suggest Joe Biden has an edge in major swing states.
The choice is good for Bitcoin for two reasons. First, a Biden or Trump win would benefit BTC in the short term, according to industry data.
Tyler Winklevoss, the CEO of the Bitcoin Gemini exchange, She said:
“Both political parties are addicted to the Fed’s money printer, so no matter who wins the election, the only real long-term winner will be #Bitcoin.”
Tom Lee from Fundstrat Global Advisors She said shares could rise 10% with a Biden win. If so, the risky assets would likely be recovered, ultimately benefiting Bitcoin. But yesIf Trump wins, Lee said the stock could see an even greater rise from 15% to 17%.
Meanwhile, Goldman Sachs issued a note earlier this month suggesting that “a blue wave would probably lead us to improve our forecasts”. Although experts are divided on the potential impact of the choice on the stock market, it appears that both scenarios would be beneficial for BTC by the end of the year.
The US stock market rally coincides with the rebound of BTC
When the Dow Jones saw a 350 point rise in the previous market, BTC’s price jumped from around $ 13,500 to $ 13,730 in 30 minutes.
Although Bitcoin has shown a declining correlation with US equities in recent weeks, during an uptrend, BTC and stocks are likely to rise hand in hand. While Bitcoin is considered a store of value, both BTC and stocks remain risky assets.
A rising stock market could mean markets are ambivalent about the final winner of the election.
Short sellers caught by surprise
When Bitcoin’s sudden surge occurred, the funding rate for BTC futures on Binance Futures was less than 0%.
Cryptocurrency futures exchanges implement a mechanism called “funding”, which incentivizes the market minority. If the number of short sellers is greater than the number of long buyers or owners, the sellers have to pay the buyers commissions every eight hours.
But when the price of Bitcoin goes up and there is also an additional incentive to buy or buy BTC, a small contraction could occur. Considering that BTC was up 2% in less than an hour, the dominant cryptocurrency saw a sharp short-term contraction.
Currency outflows are increasing
According to data from CryptoQuant, an on-chain market analysis firm, exits from exchanges saw the biggest increase this year at around 30,000 BTC.
Traders deposit Bitcoin on exchanges when they want to sell their holdings. Therefore, When capital flows from exchanges, it means that traders, whales, and retail investors intend to hold their holdings in BTC for an extended period.
The combined factors of a brief contraction, election uncertainty, an upward trend in the stock market, and increased currency outflows contributed to the sudden rise in the price of BTC.
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