Bitcoin bulls and meme stock traders are excited about the prospect of another Donald Trump presidency. Or at least the possibility of conducting some momentum trading in the next 18 days.
Here is the deal: Bitcoin, the world’s largest cryptocurrency, surged briefly to a three-month high above $68,000 on Wednesday, fueled by a combination of signals, including the former president’s statement on X that “crypto is the future” and Vice President Kamala Harris’ nod Monday to regulatory support for digital assets.
At the same time, Trump Media shares were recovering from Tuesday’s inexplicable 10% dip and resumed their meme-stock-like trend of rising without any fundamental cause to do so. The stock closed Wednesday up more than 15%.
Crypto And Meme Stock Boosters Aren’t Doing ‘Trump Trades’ — They’re Just Doing Trades
What do digital currencies and media stocks have in common?
Not much generally. However, in recent weeks, they appear to have shifted in tandem with traders’ estimates of Trump’s reelection chances.
To be clear, these traders do not have a crystal ball; they are simply wagering, with varied degrees of skill, on highly volatile assets.
Crypto traders are ecstatic at the Republican nominee’s apparent 180 on an asset class he previously branded as a fraud. Even if Tuesday’s launch of Trump-backed cryptocurrency platform World Liberty Financial revealed lukewarm interest and numerous technical issues, the former president has spent months recruiting industry billionaires and generally telling devotees what they want to hear.
That enthusiasm skyrocketed Wednesday when Trump extended his lead over Harris on Polymarket, a cryptocurrency-focused predictions website where you can wager on the election outcome. According to those investors, Trump has a 59% probability against Harris’ 41%. (This is drastically out of line with national polls, including CNN’s “Poll of Polls,” which currently show a near tie.)
“As the election approaches, voting estimates may cause market swings,” says Robinhood’s senior director of investment strategy, Steph Guild. Bitcoin may gain from Trump’s improved odds, she said, “given that he is seen as more friendly to crypto in general.”
Aside from the election prediction game, Adrian Fritz, global head of research for crypto business 21shares, tells me that bitcoin, a bellwether for the broader crypto market, is being propelled by other macro tailwinds. Not least, central banks around the world are lowering interest rates, making risky assets such as cryptocurrency more appealing. Plus, it’s #Uptober, a month when digital assets have historically performed well.
“It’s no surprise that it became way more political on both sides,” Fritz points out. “The positive aspect is that it draws attention to the entire space…” We firmly believe that, regardless of who wins, the outcome will be beneficial to the industry.
According to Barron’s journalist Al Root, the equivalent of all DJT shares available for sale has changed hands multiple times in the last week, with investors hanging onto the stock for an average of only two days. For instance, Root observes that Apple shares take more than a year to fully turn over.
Crypto And Meme Stock Boosters Aren’t Doing ‘Trump Trades’ — They’re Just Doing Trades
That level of volatility makes cryptocurrency appear stable in comparison, but it attracts a certain type of iron-stomach trader looking to purchase on the rise and sell before it peaks. (Sounds simple, but your investment adviser might tell you you’d be better off going to a casino, where you could have a great cocktail and enjoy playing cards while losing money.)
Fritz thinks that momentum plays are “absolutely” happening. “This affects both consumers and professional investors. “The basis trade is one of the most popular bitcoin strategies,” he stated.
(In other words, hedge funds are leveraging up to execute complicated trades that take advantage of slight price variations between bitcoin’s spot price and futures market pricing, increasing trading volume even further.)
Bottom line: Bitcoin and Trump Media may get considerably more volatile in the coming weeks as more traders enter the market. However, if analysts or voters are looking to the market for clues as to how this presidential election will play out, keep in mind that traders will trade. While some sincere believers may be investing in supposedly pro-Trump assets, the great majority are simply working the casino floor, hoping to cover their bets and gain a few bucks.
SOURCE | AP
