As the U.S. presidential election reaches its final stages, altcoins – smaller cryptocurrencies such as Dogecoin and Solana – have emerged as one of the riskiest trades in the crypto market. After lagging behind Bitcoin for much of the year, these alternative digital assets could experience significant swings depending on the election results, potentially facing the biggest gains or losses of all crypto assets.
Recent Performance: Bitcoin and Altcoins on the Rise
Bitcoin’s Growth in 2024
Bitcoin rose by about 5.1% on Tuesday, reaching $70,537, just 5% below its all-time high of $73,800 from March. This year, the cryptocurrency has gained over 65%, securing its position as the largest by market cap and solidifying its role as a dominant force in the digital currency space.
Dogecoin Rallies with Elon Musk’s Support
Dogecoin, which started the year at a much lower price, recently surged by about 18%, partly driven by Elon Musk’s playful comments about creating a Department of Government Efficiency, or D.O.G.E., if Donald Trump wins the election. Dogecoin, now trading around 17 cents, has nearly doubled in 2024.
Altcoins at a Crossroads: Risks and Opportunities
For altcoins, the election outcome represents both risk and reward. Unlike Bitcoin, which tends to be less influenced by political outcomes, altcoins are more vulnerable to regulatory changes and market sentiment. As Zaheer Ebtikar, founder of Split Capital, notes, “For Bitcoin, the election doesn’t matter much, but for altcoins, especially if Kamala Harris wins, they may not recover as well.”
The Political Context for Altcoins: How the Election Could Impact Their Future
Trump vs. Harris: Contrasting Approaches to Crypto
On the campaign trail, Trump has positioned himself as a pro-crypto candidate, appealing to the industry’s supporters. Kamala Harris, on the other hand, has pledged a more cautious regulatory approach, promising to implement a framework for digital assets. Many in the crypto community believe that a Trump victory would benefit the industry.
Ebtikar explains that a Harris victory could bring stricter regulations, especially impacting altcoins, while Bitcoin and Ethereum, with their decentralized structures, might be better positioned to weather regulatory scrutiny.
Historical Trends: Altcoins in Bull Markets
Historically, altcoins tend to shine during bull markets, especially when investors shift to smaller-cap coins after significant Bitcoin rallies. However, over the past year, altcoins have struggled to outperform Bitcoin, with the notable exception of “memecoins” like Dogecoin, which often derive value from social media hype rather than intrinsic utility.
What to Expect in the Short Term: Volatility and Liquidation Risks
Crypto Options Indicate High Volatility
With the election approaching, crypto options, particularly Bitcoin options, signal a high potential for short-term volatility across the digital asset market. Analysts predict that a Harris victory could push prices down, while a Trump win is expected to boost them.
Vetle Lunde, head of research at K33 Research, points out that the market is heavily exposed and highly sensitive to the election’s outcome. “In the very short term, a Harris win is expected to drive prices lower, as traders are far from fully hedged. That said, we expect this reaction to be short-lived, with cleared uncertainty and an expanding macro environment supporting strong momentum by year-end.”
Impact of Bitcoin Options Expiries on Market Sentiment
Around the election, Bitcoin options expiries have seen significant interest, with traders purchasing higher-priced puts, while others place optimistic bets with calls. This setup reflects differing views on the election’s impact: some traders are hedging against a Harris victory, while others maintain bullish positions on a potential Trump win.
The high exposure to leveraged positions means that big swings in Bitcoin prices could trigger liquidations, especially if the election result diverges from the market’s expectations.
Mid-Term Outlook: Crypto Markets Expected to Rally After the Election
Market Reaction Following the Election
Despite the uncertainties surrounding the election, some traders and analysts believe that the crypto market is set to rally in the medium term, regardless of the outcome. Shiliang Tang, president of Arbelos Markets, asserts that as the election passes, the market will likely refocus on macroeconomic factors and Federal Reserve policies, which could help lift the sector.
Sustainable Growth in 2025?
If the market manages to move past short-term volatility, there’s optimism that 2025 could see more sustained growth, particularly if regulatory advances make it easier for institutional investors to enter the space. However, altcoins remain a high-risk bet, with the potential for large gains or losses hinging on the regulatory environment that emerges post-election.
Conclusion: Altcoins as a Barometer of Crypto Market Volatility
Altcoins are at a critical juncture, serving as the primary risk asset in the current crypto landscape. The 2024 election could shape the future of these assets, with polarizing outcomes depending on whether Trump or Harris wins. While Bitcoin is expected to maintain its relative stability, altcoins remain directly impacted by political and regulatory shifts.
As the U.S. political landscape unfolds, crypto investors will need to stay vigilant, ready to adapt to the volatility that will likely shape the market in the coming months.
