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Bitcoin – a Hedge Against Stock Markets During Election Season?

The clock is ticking as we approach the 2020 US presidential election set on November 3rd, which is less than a month from now. Anyone who helms the head of the state will determine the direction and set the course of the world’s economy and political landscape for the next four years.

In an election year, especially during the months leading up to the election, markets tend to be fragile and easily spooked by any unexpected news, be it coming from election polls or in this case, Trump himself. 

“A Democratic clean sweep of power in the United States would be the best outcome for Asian investors. Although polls show a likely Biden victory at the U.S. presidential elections, investors are understandably wary of a repeat of 2016’s election results which saw polls favoring Hillary winning by a comfortable margin,” said Patrick Tan, CEO of digital assets hedge fund Novum Alpha. 

“Options and hedging activity in 2020’s U.S. presidential elections is substantially more expensive than in 2016, investors are once bitten twice shy and nothing is certain when it comes to the U.S.”

When markets are in a state of uncertainty, a slightly excessive push in either direction can drive them up or down, as we have witnessed during the past few weeks. It is a fact that Bitcoin (BTC) was also affected by the irrationality of the stock markets in the past few months. However, its trait of resilience means BTC can bounce back faster than any other traditional asset. The Dollar Index (DXY) now shows signs of downtrend continuation, resulting in hard assets such as gold and its quasi digital counterpart to rally upward.

Bitcoin volatility has dropped to a record low despite the stream of negative news in early October and the cryptocurrency has shown to have reacted minimally. It almost seems as if speculators and irrational exuberant forces have moved away from Bitcoin into more exciting markets such as DeFi.

The maturity of Bitcoin which allows it to withstand the uncertainty of the market with minimal effect and its resilience could make it one of the best assets to hold during this election season.

Bitcoin Technical Analysis

Bitcoin (BTC) managed to break above the suppressing trendline in yellow to the upside in a clean and beautiful manner. At the moment, the overhead resistance at $11,500 level seems to be holding BTC back for another consolidation.

The $11,150 level should now serve as a support level for any failed attempts to break above the $11,500. With enough momentum when breaking above said level, BTC can easily push toward two of the previous resistances at $12,000 and $12,500.

Price structure-wise, BTC is now forming a series of higher lows and a first higher high has been made after the recent breakout. It seems like the bulls are gaining back control but for traders make sure you have an exit strategy in mind if the market decides to act irrationally again.

Ethereum Technical Analysis

Ethereum (ETH) also managed to create its first high-low. However, failing to break above $378 resistance means that ETH is not out of the woods yet. The closest support and resistance are located at $360 and $400 respectively.

In the larger time frame, ETH’s main goal is to create a higher high above $400 level, and then the next target should be at $490, which was a yearly high created in late August.

Disclaimer: This analysis is the view of the author’s alone, and does not in any way represent trading advice. all traders should trade at their own risk.

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