The crypto market is experiencing a surge in investment, with digital asset investment products witnessing an influx of $2.2 billion last week – the largest weekly increase since July 2023. This sudden boost is attributed to growing optimism surrounding a potential Republican victory in the upcoming U.S. presidential election.
According to a report by CoinShares, Republicans are generally viewed as being more supportive of the digital asset sector, potentially leading to more favorable regulatory policies. This sentiment has fueled a significant influx of capital into the crypto market, with Bitcoin (BTC) being the main beneficiary, receiving a staggering $2.13 billion in inflows.
The surge in investment has also been accompanied by a 30% increase in trading volumes for digital asset investment products. This, coupled with price appreciation, has brought the total assets under management (AUM) in the crypto market close to the $100 billion mark.
Pedro Lapenta, Head of Research at Hashdex, believes that the market is at a pivotal point for long-term investors, with Bitcoin only 9% away from its all-time high. He suggests that, based on historical patterns, the market could be on the verge of explosive price action in the coming months.
Ethereum (ETH), the second-largest cryptocurrency, saw inflows of $58 million, while other altcoins like Solana (SOL), Litecoin (LTC), and Ripple (XRP) also experienced positive gains. However, multi-asset products saw outflows of $5.3 million, breaking a 17-week streak of consecutive inflows.
The U.S. accounted for the majority of the inflows, receiving $2.3 billion, while other regions saw minor outflows, likely due to profit-taking. Notable outflows were observed in Canada ($20 million), Sweden ($18 million), and Switzerland ($15 million).
CoinShares analysts emphasize that the optimism surrounding a Republican victory is a key driving force behind these inflows. A change in leadership could bring about regulatory reforms that ease concerns among institutional investors and banks, further bolstering the crypto market.
Lapenta highlights the importance of the upcoming U.S. elections for the future of the cryptocurrency market, stating that they will be crucial for providing regulatory clarity and influencing token regulation and broader industry adoption.
Interestingly, both major U.S. presidential candidates are viewed as more open to the sector, potentially leading to regulatory reforms that could alleviate concerns among investors.
Furthermore, Lapenta points out that the market is roughly 180 days past the last Bitcoin halving, a significant event that typically triggers explosive growth in Bitcoin prices. He suggests that, based on historical cycles, October might be the last month before we experience the next bull phase for Bitcoin.
This cycle will also be unique, as regulated products like Bitcoin spot ETFs are now widely available, offering institutional investors new avenues for exposure.
Bitcoin’s price action has traditionally followed global liquidity patterns. As the Federal Reserve is expected to reduce interest rates to combat inflation, cryptocurrencies like Bitcoin are likely to benefit. Lapenta emphasizes this connection, stating that Bitcoin’s price tends to align with global liquidity, which is currently expanding.
The upcoming Benzinga Future of Digital Assets event on November 19 will be a crucial platform for industry leaders to discuss the evolving regulatory landscape, including the potential outcomes of the U.S. election, and its impact on the digital asset market.