Bitcoin primed for post-election rally despite US investor caution – CryptoQuant

Bitcoin’s current valuation aligns closely with its price levels before the past two US elections, suggesting that the crypto could be primed for growth if a favorable post-election catalyst surfaces, according to CryptoQuant’s latest report.

Historically, Bitcoin has rallied after the US presidential elections, posting significant gains by the end of each election year — 98% in 2020, 37% in 2016, and 22% in 2012.

In 2024, Bitcoin is fairly valued at around $67,000, hovering just above the “realized price,” or the average cost basis for all current holders, which is a sign of healthy demand and room for further price increases.

In recent months, Bitcoin demand has accelerated markedly, growing at a pace of 248,000 BTC per month, the fastest rate since April. However, while global demand surges, there is a disconnect among US investors, who appear to be sitting out this wave of growth.

The negative Coinbase premium — reflecting lower US demand compared to global trends — has been consistently in the red since early October, indicating that American buyers remain cautious.

Profit-taking and reduced leverage

CryptoQuant’s analysis showed that while Bitcoin prices recently spiked from $60,000 to $73,000, the rally was quickly tempered by profit-taking, leading to a correction rather than a speculative buildup.

Instead of new short positions, this price decline was driven by traders who opted to secure gains after a 20% price increase from early October. This profit-taking trend led to a significant reduction in open interest in Bitcoin futures markets, removing around $4 billion in leveraged positions.

This indicates that traders are preparing for potential volatility in the wake of the US election, choosing to de-risk their positions rather than extend into new long bets.

Exchange activity further supports this cautious approach. Daily Bitcoin inflows into exchanges currently stand at 45,000 BTC — well below the 2024 peak of 95,000 BTC observed in March and the 73,000 BTC inflow rate before the 2020 election.

Reduced inflows are generally seen as a sign of decreased selling pressure, which suggests that the recent price dip may not indicate broader market weakness but rather a strategic rebalancing by investors. The report suggested that this conservative posture may continue unless American interest is revived, which could act as a stabilizing force in the market.

Growing demand outside the US

The report noted that demand for Bitcoin outside the US remains strong, driven by a mix of institutional and retail buyers capitalizing on Bitcoin’s appeal as a hedge against macroeconomic uncertainties.

International buyers appear to be maintaining bullish momentum, which CryptoQuant attributed to economic concerns outside the US, including high inflation rates and currency devaluation pressures in several global regions.

This trend stands in stark contrast to US investor sentiment, where the continued negative Coinbase premium highlights a lingering hesitation to enter or expand Bitcoin holdings at current price levels.

The report emphasized that American investor participation, often measured through the Coinbase premium, has historically signaled the potential for sustained rallies when positive.

However, with the premium staying negative, it suggests US investors are either adopting a wait-and-see approach ahead of the election or are deterred by ongoing regulatory uncertainty surrounding crypto markets.

The report implied that any post-election policy developments or market-moving events in the US could potentially influence this stance, possibly shifting the Coinbase premium to positive territory and activating a more sustained rally.

In the meantime, market conditions remain mixed. While Bitcoin’s fundamentals are robust and aligned with past election cycles, a complete rally may require a reversal of American sentiment. The report added that without this reversal, Bitcoin’s potential growth may largely depend on continued international demand and favorable external economic factors.

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