At the last moment, U.S. Treasury bonds "bet on Harris," while Bitcoin "bets on Trump"!

The U.S. presidential election remains intense, marking one of the most evenly matched elections in history, with the market betting on different outcomes. U.S. Treasury bonds have shifted to "betting on Harris" at the last moment, while Bitcoin continues to "bet on Trump."

On Wednesday, the U.S. election entered the vote-counting stage. Bond market traders increased their bullish bets on U.S. Treasuries at the last moment, with options, futures, and cash positions all turning bullish, raising the stakes on Harris's potential victory.

Meanwhile, Bitcoin continues to support Trump, with its gains on Wednesday exceeding 2%, currently reported at $71,033, maintaining its largest weekly gain.

Analysts believe that bonds fear a Republican sweep, as Trump would push for tax cuts and tariff plans, expand the fiscal deficit, and restart an era of inflation, which would drive up the yield on 10-year U.S. Treasuries. In contrast, cryptocurrencies could benefit both ways; Trump is undoubtedly a supporter of cryptocurrencies, but Harris has also hinted that she would not continue the Biden administration's harsh crackdown on the industry.

U.S. Treasuries Shift to "Betting on Harris"

U.S. Treasury investors are making significant moves into trades that could profit from rising Treasury prices, believing this scenario is more likely if Harris wins the election, while reducing bets on Trump's victory.

Since Monday, U.S. options activity has been predominantly focused on short-term bullish bets, with weekend polls showing Harris gaining an advantage over Trump, prompting traders to prepare for a potential Harris victory.

This shift has also been observed in the futures market, with new bullish bets emerging on Monday, including a significant increase in demand for longer-term bonds. As of the week ending October 29, net long positions in 10-year Treasury futures held by asset management companies increased by approximately 182,000 contracts.

Additionally, JP Morgan's latest client survey indicates that net long positions in U.S. Treasuries are at their highest level in about three months, which is another sign of a shift in market sentiment.

These actions mark a turning point for traders, who initially established bearish positions based on expectations of a Trump victory. However, as polls indicate a deadlock in the race, investors are now preparing for the possibility of an opposite outcome and bracing for market volatility.

Bitcoin Still "Stands with Trump"

On Wednesday, Bitcoin's gains exceeded 2%, currently reported at $71,033, maintaining its largest weekly gain, down less than 5% from the record low set in March.

Due to Trump's support for digital assets, Bitcoin's rise is seen as part of the so-called "Trump trade."

Trump has vowed that if he returns to the White House, he will make the U.S. the global capital of cryptocurrency, establish a strategic Bitcoin reserve, and appoint regulators who are enthusiastic about digital assets, indicating that he is the most friendly candidate towards the industry. Harris, on the other hand, has taken a more cautious approach, promising to support a regulatory framework for the industry.

Bonds Fear a Sweep, Cryptocurrencies Win Both Ways?

Overall, the bond market fears a Republican sweep the most, while cryptocurrencies are expected to perform well under any circumstances.

Analysis suggests that a significant Republican victory is seen as a "clear threat" to bond buyers. In the case of a unified Republican government and Congress, Trump will push for tax cuts and tariff plans, expand the fiscal deficit, and restart the era of inflation. This will drive up the yield on 10-year U.S. Treasuries, and the bond market may decline further.

On the other hand, if Harris wins in a divided Congress, it could trigger a relief rally, increasing the likelihood of a stalemate, which could help control government spending.

What happens in other scenarios is almost contentious. JP Morgan's strategists expect that a unified Democratic government and Congress will lead to increased government spending, thereby pushing up bond yields. However, RBC Capital states that this situation is most favorable for bonds, as it will lead to corporate tax hikes, exacerbating an "unfavorable for business" environment and weakening risk appetite.

Regarding cryptocurrencies, analysis suggests that Bitcoin is likely to benefit from a Trump victory, as Trump is a strong supporter of cryptocurrencies, claiming to establish a strategic reserve of original cryptocurrencies and appointing friendly regulators for the industry. However, Harris's victory may not necessarily be detrimental to the industry, as she has indicated that she would not impose strict crackdowns like Biden.

In the short term, the optimism of cryptocurrency investors may have been partially digested by the market. Bitcoin's price has once again crossed the $70,000 mark, and Bitcoin exchange-traded funds have seen the largest inflow of funds to date. Additionally, the ongoing competition remains unresolved, leading to a significant increase in hedging demand in the cryptocurrency options market.

Bloomberg statistics show that on Monday, the net outflow of funds from 12 Bitcoin ETFs managed by companies like BlackRock and Fidelity reached an astonishing $579.5 million, setting a historical record. Options pricing indicates that the expected market volatility for Bitcoin on the day after the voting will reach 8%.

Moreover, options traders are prepared for significant profits in the future. According to data from the largest cryptocurrency options trading platform Deribit, for contracts expiring in March, the largest open interest is concentrated around strike prices of $100,000 and $110,000