The U.S. Election Will Unlock Crypto
As the clock ticks down to the pivotal U.S. presidential election on November 5th, all eyes are on the potential ramifications for the cryptocurrency market. In this article, JellyC CIO Michael Prendiville explores how the election results could serve as a catalyst for significant shifts in the crypto ecosystem. As we navigate this turbulent political landscape, understanding the potential impacts on crypto is crucial for investors and enthusiasts alike. Buckle up; the upcoming election is set to be a turning point for the cryptocurrency world!
According to Polymarket’s 2024 Presidential Election Predictions, Trump has a 55% chance of becoming the President-elect, while Harris stands at 45%. The betting markets have experienced considerable volatility leading up to the election. Trump’s probability of winning peaked at 72% on July 16, dropped to 44% on August 16, rose again to 67% on October 30, and has since settled at the current levels.
There are 6 swing states that JellyC Research is watching for early signs of an outcome; Arizona, Georgia, Nevada, Pennsylvania, Wisconsin and Michigan. Wisconsin and Michigan are currently blue states with the rest held by the reds. Predictive markets says there is a 39% chance that Pennsylvania is the tipping point state (Wisconsin 16%, Michigan 13%).
There is an 18% chance that the election result will be called on the 5th of November (3 of the last 7 results have been called on the same day as the election). There is a 44% chance that the result will be called on the 6th of November (2 of the last 7 results have been called the next day).
The results in 2016 and 2020 indicate that anything is possible. For this reason, many speculators, corporate treasuries and real money managers are sitting on the sidelines. JellyC Research believes that a Trump victory is not built into the price!
The price action leading into the election has been choppy. BTC has traded sideways since the middle of March and is coiling to move one way or the other. Our analysis tells us that there is a positive correlation between BTC and Trump winning the election. This correlation has strengthened in the last 2 weeks.
Source:CoinMarketCap
A Trump victory is positive because he has openly supported crypto and explicitly made this part of his election campaign. Trump has launched World Liberty Finance, promised to sack Gary Gensler, agreed to overhaul crypto policy and pledged to set up a Bitcoin Reserve.
The reason a Harris victory is negative for crypto is that she has not explicitly distanced herself from the Biden Administration which has carried out Operation Choke Point 2.0. Under the Biden Administration, the SEC has imposed a total of $4.68 billion in fines on the crypto industry in 2024 alone. The Biden Administration has refused to give clear guidelines, choosing instead to regulate through enforcement.
The result of the US Presidential election is a digital event for crypto. If Trump wins JellyC Research believes BTC will break the ATH's of $74,500 & test $100,000. If Harris wins BTC will head south first.
The sequence of events after a Trump victory will be extremely bullish. The SEC will refrain from piling more fines on crypto companies operating in the U.S. until legislation is passed. There will be clear definitions of what is a security and what is a commodity. Defi will flourish and the tokenisation movement will accelerate. Countries all around the world will follow suit at a faster pace than ever before.
JellyC Research believes Ethereum, Solana, and the major alts will also benefit from a Trump victory...but it will take time. On this basis we believe BTC dominance is a sell above 70. We will rotate out of BTC and into Alts above this level.
BTC Dominance
JellyC Research believes BTC dominance is a sell above 70 i.e. rotate out of BTC and into Alts.
BTC volatility on the 5th of November sits around 44%. This compares to volatility on the 8th of November which blows up to 83%. JellyC Research believes that despite the high level of volatility post-election date, directional bets (& hedging) offer good value.
The Trovio market neutral fund sells volatility and has returned 25% in the last year. This fund has liquidated all short volatility positions leading into the election.
JellyC Research understands the limitations of using predictive markets as an indicator to predict election outcomes. The probabilities can be influenced by 'whales' who are looking to influence the result (see foreign actors). If faced with having to choose between polls and predictive markets, we would lean towards the latter. As predictive markets gain more scale the probabilities will be harder to manipulate, noting that $3.1Bio has been wagered on this result on Polymarkets.
Strap yourself in, this is going to be exciting!
Disclaimer: JellyC Pty Ltd is a corporate authorised representative (CAR Number 001293184) of TAF Capital Pty Ltd ACN 159 557 598 AFSL 425925. Any information in this document is not intended to promote or recommend any particular product or services offered by CAR. It does not take into account the objectives, financial situation or needs of any investor. Before making an investment decision, investors should read the relevant offer document and (if appropriate) seek professional advice to determine whether the investment is suitable for them. This information is intended only for wholesale clients within the meaning of s761G and s761GA of the Corporations Act 2001 (Cth). Past performance is not indicative of future performance. The information contained in this email is confidential and is intended solely for the addressee. If you are not the named addressee, please delete this email. You must not disclose or use in any way the information in the email. If you have received this email by mistake, please notify the sender immediately by reply e-mail and delete this email and destroy any printed copy.