This Election Week is Won by Markets; US Dollar Under Pressure with Risk On
On Thursday, the price of Bitcoin went nearly to $16,000 and is currently holding around $15,500. Having rallied 20% this week, the digital currency seems to be now in consolidation mode providing the altcoins the chance to surge.
These gains came during the US election week, which helped the leading digital currency beat major asset classes this year.
With 115% gains in 2020, Bitcoin exceeds gold’s 28% returns and S&P 500’s 8.60%.
Everything is aiming for their all-time highs following the Nov. 3 election as Joe Biden’s lead strengthened with the possibility of a Republican Senate. Such an outcome of a split government, according to some, could lead to an increase in fiscal stimulus.
“We still anticipate that there will be a fiscal package in excess of $1 trillion next year,” said James Knightley, chief international economist at ING Group in New York.
Besides the escalating pandemic and looser monetary policy, the sliding greenback helps push the digital asset higher as investors seek stores of value.
The dollar has its worst week since March, and according to Kit Juckes, a strategist at Societe Generale, “If you had to write a playbook that would get people to say ‘I need an alternative to the dollar,’ this whole process fits that story.”
During the period BTC rallied, the risk-on backdrop triggered a sell-off in the dollar, which fell to a 2018 low.
“Gold, silver, and Bitcoin have worked like a dream in the weak U.S. dollar environment and has attracted huge client interest,” wrote Chris Weston, head of research with Pepperstone Group Ltd., adding, further weakness in the dollar would encourage “an even more constructive view” on both gold and Bitcoin.
Crypto markets also have a history of wild swings, and it is currently on its third such cycle, riding a tide of liquidity.
Mania isn’t Here Yet
In the stock market, tech stocks are rallying on expectations that key progressive goals like antitrust reforms won’t be implemented by Biden.
According to Goldman Sachs analysts, financial services companies will also benefit from better capital markets and a lower likelihood of tighter regulation.
Already, more than $4 trillion has been added to global equity markets this week, putting it on track for the third-biggest week of 2020.
And with this, investors are back into pouring cash into global markets with a force that hasn't been seen in months. The same is happening in the crypto markets, which added about $50 billion during the same period.
This can be seen in the open interest in Bitcoin options, which is reaching $4 billion. As per CME’s latest COT report, short interest from hedge funds has made a new all-time high, the same as short interest from dealers and intermediaries.
According to on-chain analyst Willy Woo, Bitcoin is not topping; rather, it will see more bullish action after consolidation.
As for the price action that we have recently, it was the “most organic pump” instead of a squeeze from derivatives traders as a “ridiculous amount of coins were scooped up and moved off to individual wallets,” — the largest one day scoop up in 5 years.
Before the pump started, the influx of new HODLers has been “through the roof,” the kind of momentum last seen in Oct. 2017, just one month before the mania started.