Author: Revc, Golden Finance

Preface

In 2024, the US presidential election entered the sprint stage, and the election situation reversed once again. Trump regained the lead in gambling odds and polls in key swing states, making the election results even more unpredictable. This political turmoil has already affected global financial markets, especially the performance of the crypto market. Bitcoin has attempted to break through the $0.07 million mark several times in the past week. Despite high volatility, investors remain cautious and wait for a clear direction in the US stock market, demonstrating a more prudent investment atmosphere.

Anxious changes in the election situation

According to the latest forecast by The Economist, former President and Republican candidate Trump may win the election, marking the first time since August that the model has predicted Trump's victory. It is expected that Trump will receive 276 electoral votes, while the Democratic candidate and current Vice President Harris may receive 262. Trump's chances of winning have risen to 54%, up 6 percentage points from last week. According to RCP data, as of the 22nd, Trump is expected to receive 312 electoral votes, enough to secure victory (270 votes are needed to win).

However, the election situation is changing rapidly. In the past 24 hours, the number of electoral votes Trump may receive has plummeted from 312 to 219, as more election information is disclosed, making key swing states unpredictable once again.

The latest Reuters/Ipsos poll shows Harris leading Trump by a slight margin of 46% to 43%. The six-day poll ended on Monday, with Harris' lead of 1% over a week ago remaining stable at 45% to 42%, indicating an unusually close race.

Trump also holds a slight lead in Wisconsin, Michigan, Pennsylvania, and Nevada.

Market News Analysis

The correlation between the US stock market and the crypto market implies that the trend of the US stock market still plays a significant guiding role in the emotional aspect of the crypto market. A report from Wells Fargo & Co. pointed out that regardless of the election results on November 5th, the stock market may experience a "sell the news" effect, with stock prices falling after the news is released. Wells Fargo & Co. believes that the abnormal rise of the S&P 500 index before the election is inconsistent with historical trends, indicating a situation of asymmetric risk-return in the market.

Wells Fargo & Co.'s strategist pointed out that the S&P 500 index has risen by 3% in the past month, reaching 4.4% in the past two months. Based on historical experience, during the previous six presidential elections, the stock market generally fell on election day as investors tended towards safe-haven assets. The report listed several potential "sell the news" scenarios:

1. Election disputes: If there are disputes in the election results, the S&P 500 index may fall by 2%-5% within 1-3 days. If the uncertainty persists, the decline may be even greater. The election dispute between Bush and Gore in 2000 led to an approximate 8% drop in the S&P 500 index in November.

2. Republican sweep: If the Republicans win big, Trump may push for more aggressive fiscal policies and tariffs, raising capital costs and thereby putting pressure on the stock market.

Interest rates rising: The recent rise in the yield of the 10-year US Treasury bonds may lead to a potential pullback of the S&P 500 index to the 50-day moving average, with a drop of about 3%.

Decrease in Trump's re-election chances: If Trump's chances of re-election weaken, or if Harris unexpectedly wins, the market may also face pressure. Wells Fargo & Co pointed out that when Trump's odds of re-election decreased in July, the S&P 500 index fell by 2%-3%.

Bitcoin market heating up

As the probability of Trump's re-election increases, the market's attention on the 'Trump trade' has rapidly grown. Retail investors and institutional investors are driving a new round of the Bitcoin market, while traders are closely monitoring the possibility of Bitcoin price breaking $0.08 million during the election period.

Data shows that as of October 18th, the open interest in Bitcoin futures on the Chicago Mercantile Exchange (CME) reached a historical high of $12.26 billion, indicating that institutional investors have taken a firmer stance to manage Bitcoin volatility or price increases. In addition, the inflow of funds into the US spot Bitcoin ETF is also approaching a historical high, reflecting strong market demand for Bitcoin. Analysts point out that options traders are increasingly focusing on call options expiring in November, with a significant increase in demand for options with a strike price above $0.08 million, further boosting the market's bullish sentiment.

Summary

In summary, from the perspective of trading opportunities brought by uncertainty, it is indeed the best trading time of the year. However, this also presents higher operational requirements for investors. Setting stop-loss orders is a prerequisite for participating in the current market game. The crypto market currently faces two major risks: one is the election results falling short of expectations (e.g., Trump losing), and the other is the withdrawal of funds after the election rally. Cryptographic assets have the characteristics to absorb risks and volatility, and the energy released by political events will provide momentum for Bitcoin to break through. However, this adventure is like sailing, despite the stimulating returns, it also requires ensuring a smooth landing.