US Election Looms, Crypto Market Could See Divergence: Dogecoin and Other Altcoins at Higher Risk

US Election Looms, Crypto Market Could See Divergence: Dogecoin and Other Altcoins at Higher RiskThe US presidential election is nearing its final vote count, and the cryptocurrency market is poised for significant divergence. Smaller cryptocurrencies, like Dogecoin (Doge) and Solana, are facing greater risk and volatility compared to larger cryptocurrencies such as Bitcoin and Ethereum

US Election Looms, Crypto Market Could See Divergence: Dogecoin and Other Altcoins at Higher Risk

The US presidential election is nearing its final vote count, and the cryptocurrency market is poised for significant divergence. Smaller cryptocurrencies, like Dogecoin (Doge) and Solana, are facing greater risk and volatility compared to larger cryptocurrencies such as Bitcoin and Ethereum.

As of November 5th, Bitcoin has surged 8.36%, breaking its previous record high of roughly $73,800 set in March, and has seen a cumulative increase of over 66% this year. During the same period, Dogecoin experienced a surge exceeding 26%, partly attributed to a comment from its long-time supporter, Elon Musk. Musk stated that if Donald Trump were to win the election, he would establish a Department of Government Efficiency, abbreviated as DOGE.

Zaheer Ebtikar, founder of the crypto fund SplitCapital, opines that the election outcome will have minimal impact on Bitcoin but that altcoins will be the major victors or losers in this election. In the scenario of Kamala Harris winning, altcoins may not bounce back as anticipated.

Altcoins are cryptocurrencies smaller than Bitcoin, often showcasing outstanding performance during past market upswings. Specifically, following significant Bitcoin surges, investors tend to shift towards smaller coins. However, for a majority of this year, altcoins have generally struggled to outperform Bitcoin.

Ebtikar adds that a Harris victory could translate to heightened regulatory scrutiny for the crypto industry. Bitcoin and Ethereum could endure due to their higher levels of decentralization. During the campaign, Republican candidate Donald Trump adopted a strongly pro-crypto stance, while Democratic nominee Harris pledged support for a regulatory framework for digital assets. Crypto enthusiasts generally perceive a Trump victory as more favorable for the cryptocurrency sector.

Increased Volatility

Overall, traders generally believe the election outcome will ultimately prove positive for the crypto market. However, in the short term, the market is anticipated to experience substantial impact. Shiliang Tang, president of trading firm ArbelosMarkets, expresses, Medium-term, we believe regardless of the winner, the crypto market is going to be going up because we are getting past the election, going back to macroeconomics and the Fed.

However, Vetle Lunde, head of research at K33research, stated in a report on November 5th, "The market will be extremely sensitive to the election outcome. In the very short term, a Harris victory will pull down crypto prices. That being said, we expect this reaction to be short-lived, as uncertainty removal and the expansionary macro environment will support a strong crypto momentum heading into year-end.

Cryptocurrency options indicate a surge in short-term volatility across the asset class leading up to the election results. Data compiled by Deribit, the largest options exchange, reveals higher prices for put options, while call options have strike prices substantially above current prices. This composition points to a divergence of opinion regarding the election outcome, with more traders hedging against the possibility of a Harris win, while others continue to bet on a Trump victory.