Trump Stabilized? This "Trump Trade" is far ahead of US stocks and gold

Bitcoin has risen by about 13% in the past seven days, far outperforming global stock indices and gold. The attention on Bitcoin's rise is partly due to some investors believing that the surge in Bitcoin indicates that the market expects the Republican candidate supported by the cryptocurrency, Trump, to win the U.S. presidential election. Billionaire Stan Druckenmiller believes that cryptocurrency is one of the indicators the market is using to price in a victory for the former president.

In a fierce competition with Democratic candidate Harris, Trump has vowed to make the U.S. the global capital of cryptocurrency. His support for the industry has led Bitcoin to be classified as a so-called "Trump trade," one of a series of bets premised on his return to the White House.

As Bitcoin rises, the prediction markets have also shifted. On the Polymarket platform, Trump's chances of winning have surged to 58%, while Harris has dropped to 41%. On the PredictIt platform, Trump's odds of winning are 54%, compared to Harris's 49%.

ETF Inflows

Arisa Toyosaki, co-founder of cryptocurrency derivatives service provider Cega, said, "The excitement in the prediction markets has led to high implied volatility, boosting the spot price of Bitcoin. The recent influx of funds into Bitcoin exchange-traded funds (ETFs) has also fueled this uptrend."

Since October 11th, the net inflows of over ten Bitcoin ETFs in the U.S. have exceeded $1.6 billion.

While the prediction markets are moving in favor of Trump, with less than three weeks until election day, most polls are within the margin of error. In the national polling average on Real Clear Politics, Harris leads Trump by about 1.6 percentage points. In the battleground state polls, Trump leads by less than one percentage point.

Harris' Stance

Harris has taken a nuanced stance on cryptocurrency, promising to support a regulatory framework for digital assets and industry growth with appropriate safeguards. Her stance has sparked optimism among cryptocurrency traders, as it contrasts sharply with the crackdown during the Biden administration.

Meltem Demirors, General Partner at Crucible Capital, said, "The emergence of cryptocurrency as an election issue has driven significant attention to Bitcoin and the broader category of crypto assets, which attention is translating into sentiment, and as we know, sentiment can drive capital flows." Trump once called the digital asset industry a scam, but later shifted to supporting the industry. Digital asset companies have become influential players in elections by providing large donations to political action committees to pursue more favorable rules.

Drew McKimler said on Wednesday that in the past 12 days, the market seems "very convinced" that Trump will win. He said, "You can see this from bank stocks and cryptocurrencies."