Bitcoin and Ethereum ETFs See Record Outflows Ahead of US Election
The crypto market is exhibiting a clear case of nerves as the US presidential election draws closer. On November 4th, Bitcoin (BTC/USD) and Ethereum (ETH/USD) spot exchange-traded funds (ETFs) experienced substantial net outflows, signaling a wave of investor caution.
This trend was particularly evident in Bitcoin ETFs, with a record $541 million outflow – the second-largest single-day outflow in history, only surpassed by the $563 million exit on May 2nd. Ethereum ETFs weren’t spared either, recording $63.2 million in net outflows.
While BlackRock’s iShares Bitcoin Trust (IBIT) bucked the trend with inflows of $38.4 million, other funds, such as Fidelity’s FBTC, saw a significant $169.6 million exit, and Ark Invest’s ARKB experienced outflows of $138.2 million.
Similarly, Ethereum ETFs saw mixed fortunes. BlackRock’s ETHA registered the only notable inflow, adding $11 million. However, Grayscale Ethereum Trust (ETHE) and Fidelity’s FETH reported outflows of $10.8 million and $31.5 million, respectively, highlighting investor caution across major crypto funds.
The Trump Trade and Potential Market Swings
Market observers attribute these movements to the heightened pre-election tension. Polls indicating a close race have sparked a cautious approach among investors, with many seeking to navigate potential market swings.
QCP Capital highlights the ‘Trump trade,’ a strategy gaining traction among traders. Many are positioning long on the dollar, crypto, and expecting higher Treasury yields, anticipating a Trump victory. A potential win for Kamala Harris, however, could reverse these trends, leading to sharp swings in crypto markets.
QCP Capital further predicts a 3.5% movement in Bitcoin’s spot price on election night. However, the current low volatility premium beyond November 8th suggests that traders might be underestimating the potential post-election turbulence, especially if results are contested or delayed.
Historical Precedents and Congressional Implications
This pre-election tension echoes past election cycles, with significant market movements recorded in both 2016 and 2020. In 2016, Trump’s unexpected win initially triggered a sell-off in US futures, which swiftly rebounded, marking the most active trading days of that half-year. The 2020 election, meanwhile, wasn’t called until four days after voting closed, leading to a spike in trading volume.
Beyond the presidential race, QCP Capital emphasizes the implications of congressional races on broader market dynamics. A Republican sweep could translate to higher fiscal deficits, potentially pushing the Federal Reserve towards a more hawkish stance, an outcome that could negatively impact risk assets. Conversely, a divided Congress might result in more tempered market reactions, potentially reducing volatility.
Looking Ahead
As the election unfolds, industry participants and crypto enthusiasts will gather at Benzinga’s Future of Digital Assets event on November 19th to discuss the broader impact of these developments on the crypto market and explore strategies for navigating the evolving regulatory and financial landscape.
