This week will be full of events that could bring an exciting turn to the crypto market. Check out an analysis of the main indicators and understand
There are exciting days ahead for the crypto market. With the US elections approaching, volatility in Bitcoin reveals a mix of euphoria and uncertainty among investors.
Volatility is natural during decisive periods and important events like this. The good news is that the signs of possible new highs are very strong. I would say that we are seeing a kind of “alignment of the stars” in this direction.
Just look. We have a strengthening US economy, with inflation trending downwards, interest rate cuts after high rates not seen in 50 years, a pro-crypto US presidential candidate with real prospects of winning and a record inflow of capital into spot bitcoin ETFs, not to mention the halving, which has made bitcoin more scarce.
Looking at these positive factors, I feel very excited. Even though we may see a drop in bitcoin in the short term after the election, I see a strong chance of a significant increase.
Next Thursday, the 7th, after the elections, the Fed meeting will take place and the market expects a modest cut in the interest rate by 0.25 percentage points, after a weaker reading of the payroll.
Lower interest rates are beneficial for risk assets, as lower rates reduce the cost of money and encourage investors to seek out assets with higher potential returns rather than low-yielding bonds.
Furthermore, it increases the amount of money circulating in the economy, which can drive capital into the crypto market, helping to drive up prices.
Election and impact on the market
But before the Fed's decision on interest rates on Tuesday, the 5th, the presidential elections will be crucial for the crypto market. On one side, Donald Trump, an avowed defender of bitcoin, and on the other, Kamala Harris, who has shown a more moderate openness to the asset. Although both have received donations from companies in the sector.
It is normal to expect volatility and we should not view it negatively, after all, it is just a price variation. Variations can be extremely positive if we know how to use them to our advantage.
Right after the election, we may see an initial drop, but depending on the market mood, it is not impossible, for example, for a reversal to an increase on the same day. In my opinion, the market is already pricing in a Trump victory and a "sell the news" may occur.
"Sell the news" is a strategy in which investors sell assets immediately after a relevant piece of news is released, even if it is positive. The idea is that the asset's value has already risen in anticipation of the news, so investors take advantage of it to take profits.
Still, I don't see any reason to be too worried. We have plenty of good reasons to believe in a rally.
With the election results, we will be able to have a clearer view of US monetary policy for the next four years and begin to estimate what could happen in 2025.