"Trump Trade" affecting bitcoin? (Sunday, 8/18) news of individual stocks

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Translation of the text translated from English to Japanese by MooMoo.

- News Details (Text translated into Japanese by MooMoo) (*Please note that there may be some unclear parts, thank you for your understanding.)

So-called Trump trading is one of the most anticipated trades in cryptocurrency. Traders are betting on the probability of Donald Trump winning the November US presidential election.

Generally, cryptocurrency traders expect increased volatility before and after the election. This is equivalent to implied volatility. Options expiring in November are much higher compared to options expiring close to the election.

Bohan Jiang, the OTC options trading manager at Abra, said in an interview, "This is just a reflection of market pricing on risk premiums during the event period."

Sean Farrell, the digital asset strategy manager at Fundstrat Global Advisors, stated in an interview earlier this month that investors have been pricing in the so-called 'Trump premium' for the past few months. This suggests that as Trump's chances of winning increase, cryptocurrencies are expected to trade at higher prices due to the bullish sentiment towards Bitcoin, indicating a similar trend in the opposite direction.

As part of a series of initiatives to appeal to cryptocurrency enthusiasts, Trump has pledged to increase the US Bitcoin reserve and ensure that Bitcoin is primarily mined in the USA. In contrast, many in the crypto community believe that the Biden administration was hostile towards digital assets.

Read: What Kamala Harris needs to do to win back cryptocurrency voters

Sometimes, there seems to be a particularly noticeable synergistic effect between the price of Bitcoin and Trump's chances of winning. After Trump survived the assassination attempt on July 13, the possibility of the former president's victory increased, causing Bitcoin to rise by over 18% in 7 days.

However, Abura-no-Kou pointed out that such correlation is temporary. There is not much statistical evidence showing a positive correlation between Trump's chances of winning and the price of Bitcoin, but as the election approaches, the situation may change, as stated by Kou.

According to Nico Cordeiro, Chief Investment Officer of the quantitative cryptocurrency hedge fund Strix Leviathan, currently the most prominent correlation related to Bitcoin is with the technology-heavy Nasdaq Composite COMP stock market index.

The correlation between Bitcoin and stocks has been fluctuating over time, but due to concerns about a recession and expectations of Fed rate cuts dominating the minds of most risk asset investors, the two assets have moved almost in parallel over the past few weeks.

The extent to which the price of Bitcoin is related to Trump's chances of winning also depends on the Democratic Party's stance on cryptocurrency. Investors have been eagerly awaiting the attitude of Democratic Presidential candidate Kamala Harris towards asset classes as she prepares to announce her economic agenda ahead of the Democratic National Convention next week.

"If the Democratic Party remains hostile and Harris' odds improve, it could potentially bring headwinds [to Bitcoin]. Interestingly, if the Democratic Party softens its stance on cryptocurrency, the correlation between Trump's odds and BTCUSD may break," wrote Alex Thorn, Chief Research Officer at Galaxy Digital in a recent note.

Harris has not yet taken a clear stance on cryptocurrency, but Thorn is skeptical about whether her attitude towards the asset class will clearly shift from the Biden administration's stance.

However, in the early August of Harris's election campaign, David Plouffe, former chief political advisor to Barack Obama, who had once been an advisor to the cryptocurrency exchange Binance, participated, causing some updates to seem promising. Reports indicate that Brian Deese and Bharat Ramamurthy, former economic advisors to Biden who were critical of cryptocurrencies, are supporting Harris's economic policy agenda, which somewhat tempered expectations.

"In my view, I strongly doubt whether Harris's campaign can expect a reset of cryptocurrency policy," said Mr. Thorn. "I have an intuitive feeling. Most market participants believe that a Harris-Walz victory over Trump-Bance would be negative for Bitcoin prices in the short term and understand that."

Matthew Graham, founder and managing partner of Ryze Labs, a cryptocurrency venture capital company, also reiterated that point.

"I think it's a misconception to assume that if Harris is elected, her administration would be more favorable to the cryptocurrency industry than the current administration," Graham told MarketWatch. "Of course, that might change."