Editor’s note: This article discusses the Fluctuation of BTC prices during the election, pointing out the close relationship between BTC prices and Trump’s chances of winning. The short-term pump is overestimated, while the actual uptrend has occurred. The value of BTC as an inflation hedging asset will gradually become apparent, and it is believed that there will be little price change after Trump’s victory. Ultimately, the long-term pump of BTC will occur in 2025/2026.

The following is the original content (for ease of reading comprehension, the original content has been slightly reorganized):

Series Analysis of Today’s Election Results

First, let’s start with the analysis of the current dominant BTCPA betting market odds. For reference: at the time of this post (14:02 UTC), the odds of Trump winning were 61.7%, while the BTC price was $70,047.38.

The relationship between BTC PA and Trump’s winning odds

I will first compare the relationship between BTC PA and the odds of Trump’s victory, assuming that the Fluctuation in BTC price in the past few weeks is entirely based on Trump’s chances of winning. Next, I will divide these PAs into four different stages.

October 5 - October 12: Opportunity Emerges

In this week, the mentality of market participants began to change:

Trump’s probability of winning (slowly rising to over 50% in the betting market) is not zero. In fact, the election seems closer than expected (especially after Biden’s retirement). The initial impact of this perception is that market participants begin to hedge their expectations of Harris winning, or re-evaluate previous biases.

By comparing the two baskets GSP24DEM and GSP24REP, it can be clearly seen that after the Harris-Trump debate, the market was too complacent about Harris’ victory.

The market not only showed complacency in the result, but also seriously misjudged the possibility of Trump’s victory. In August and September, when there was almost no follow-up to the election situation, the market was almost completely priced for Harris to win.

Therefore, the following situation arises:

1. Over 75% of people believe that the probability of Harris winning is very high.

2. Almost no one follows Hedging for Trump’s victory, everyone is focused on index risk Hedging

3. The gambling market suddenly begins to tilt towards Trump.

There was another thing worth following in the TradFi market at that time, which can help better understand the speed of emotional changes at that time. In the first phase (October 5th to October 12th), there was a significant Hedging demand at the index level. This means: everyone thinks that the market index (such as the S&P 500, Nasdaq) may experience a significant decline. [Remember the situation in Iran, etc.?]

Therefore, investors have been buying index Hedging to avoid suffering from massive ‘explosive’ impact. However, whenever there is a large amount of index Hedging without actual risk eruption, ‘painful trades’ often Reverse upwards. As a result, the market starts to rise. The worst-case conflicts (such as Iran and Israel) did not occur, and the market sentiment has also calmed down.

(Viewing the image, the returns after short-term hedging are usually extreme).

The fear, uncertainty, and doubt (FUD) in the Middle East are not insignificant, although encryption Twitter (CT) seems to mistakenly downplay its impact. During this week, the premium of the Hedging index reached an unprecedented level, and investors’ nervousness has almost focused all their attention on the downside risk of the index, ignoring the upcoming elections.

This reversal of sentiment did not occur at the peak of oil prices in early October (see chart: oil price pressure), but in late October. The Trump/election trade began when investors were focused on index risks (see BTC’s strong performance on October 10th), not recently.

The above content is to help readers understand the theme of the period from October 5th to October 12th and why there is not enough follow-up to this transaction, why the ‘Trump trade’ has become such an important dominant theme, and ultimately the reason why there are no buyers to take over the profits.

In summary: The index risk brought about by the Middle East situation provides a good buying opportunity for those who dare to challenge the panic sentiment, thus opening the ‘Trump trade’. The complacency of Harris’s victory is starting to reverse, with the market focus shifting to the fear, uncertainty and doubt in the Middle East.

So, something happened: the sensitive stocks of Trump welcomed the most abhorrent Rebound, driven by ‘no one has the right tail risk’ and the mean reversion of Trump. BTC reacted relatively slowly to this emotional change, and we were one of the last assets to follow the change, along with Trump media (a bit like MEME stocks), pumping as the probability of Trump’s victory rose (in fact, the actual stock basket adjustment was relatively quick, with most Republican stocks already adjusted in early October). Mean reversion is happening.

BTC has shown strength since the last pullback on October 10th, as market participants realize that election trading has started and the entire market is now in a ‘risk-on’ mode.

October 12th - October 30th: chase rising prices trading

During this 18-day window, the amount of BTC accumulated just to wait for the election results was insane. This rebound was basically a one-way pump, mocking the shorts and completely swallowing the pullback. ETF inflows reached a new high. It’s a crazy bullish environment.

But why is this happening? Is it because of Saylor’s forward-looking trading? Actually, no. MSTR’s announcement has hardly caused any fluctuation. It all stems from election trading, and that’s it. Apart from the rise in Trump’s chances of winning, there are no other factors (such as interest rates or inflation) that can provide buyers with this signal of chasing rising prices.

During those days, the market was pumping almost every day, completely ignoring geopolitical risks and the weakness of the NASDAQ (for example, on October 15th, the difference in trend between NASDAQ and BTC). The entire market showed a large green candle. All of this is closely related to Trump’s probability of winning the election. Trump’s sensitive stocks were heavily bought, and BTC pumped along with it.

We have been chasing the price all the time, the Close Position contract (OI) continues to increase, even though the leading margin of Perptual Futures is very large, BTC continues to pump, and there is no significant pullback, even though the Nasdaq is weak. For example, on October 17th, the price near 67K remained stable for a period of time, and then the Spot market followed slightly, but there was no significant pullback. This indicates that there is not only a short-term leverage liquidation demand in the market, but also actual demand to support the pump. This also implies that this pump is event-driven, and investors hope to enter the market at this time.

Around October 14th, the market shifted from ‘We didn’t properly consider the probability of Trump winning’ to ‘Trump seems to be winning, now we have to quickly chase rising prices’. During that week, the macro market showed a clear correlation with Trump trades, especially in the nuclear energy and commercial real estate zones, which pumped along with BTC-sensitive stocks. Obviously, this pump was not accidental, but the result of the push from Trump trades. The true core of this trend occurred that week, and any pump afterwards was just speculative capital betting on short-term results.

After pumping for several days in a row, a turnaround finally occurred. During the reversal trading period from October 30th to November 4th, the price of BTC was highly correlated with the probability of Trump’s victory. Since October 10th, the market did not easily absorb the pullback as usual for the first time, despite the price hitting a new high. Although there was not much change in technical factors such as the improvement of OI for unclosed contracts, the market became hesitant.

The hesitation is due to the decline in the probability of Trump’s victory, not the so-called ‘election risk removal’. For example, the S&P 500 and the Nasdaq 100 index pumped 1% and 1.2% respectively, but this is not the removal of election risk, but the sharp dumping caused by the decline in Trump’s chances of winning. This kind of association was hard to imagine a few months ago, and currently, the market participants holding election bets hold such a large supply, completely dominating the PA.

Why hasn’t Trump’s victory - if it is so important to BTCPA now - pushed BTC above 80k? Every tiny price Fluctuation is currently related to Trump’s election probability, but why doesn’t Trump’s victory directly drive BTC pump?

Who will be the next buyer? Why? Who will come out and say, “Yes, now is a good time to buy BTC” after Trump’s victory? Of course, there will be buyers, but will these people be able to surpass the investors who have accumulated BTC for more than a month, and are ready to take profits once their bets succeed? The answer is no.

After Trump’s victory, we may see a retracement of the entire rally. So what short-term incentives are there to encourage people to buy BTC at this stage? Will Trump announce the establishment of a sovereign BTC fund on Inauguration Day? No. What policies need to change? The United States has been moving towards a BTC-friendly direction. How many times did Trump mention BTC or cryptocurrency during the campaign, especially compared to immigration issues? None.

Therefore, there will not be much change in the short term. What people are facing now is a time window of over 2 months (until January 20th when Trump officially takes office), and after that, it may take a long time to see real changes.

Traders aren’t betting on what might happen in at least two months. Buying BTC now is not a bet on President Trump’s term, but on the upcoming election results. The 40% probability of a Harris victory makes LongBTC less attractive now, as you still face a lot of short-term supply dumping. If we assume that the return of going long is a 60% chance of winning $4 and a 40% chance of losing $10, from a risk/reward perspective, going long is not very attractive. Therefore, many people forget that this election market is more like a ‘slaughterhouse’ filled with short-term funds.

My BTC Price Prediction Summary: Trump Wins: Initial Excitement, May Rush to New All-Time Highs But No Support Around 70k, After Falling Back, Savvy Holders Will Buy BTC With the Logic of Inflationary Hedging Assets. Harris wins: 1 month of Trump’s victory “early bet” failed, there was a big dump, more savvy holders will buy supply, and the price slowly rises back to record highs as an inflationary hedging asset.

I don’t think the election results are important. I’m bullish on Bitcoin and see it as an inflation hedging tool, but the short-term pump fluctuation is overestimated. The core part of the market has already happened.

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