Cryptocurrency and meme stock enthusiasts aren't engaging in 'Trump trades'; rather, they're merely executing trading activities.
This situation: Bitcoin, the major digital currency, momentarily climbed to a three-month peak of over $68,000 on Wednesday, sparked by a blend of factors, including the ex-president's endorsement of crypto as the future and Vice President Harris's backing of digital asset regulation.
At the same time, Trump Media shares recovered from their mysterious 10% slide on Tuesday and resumed their meme-stock-like upward trajectory without any substantial basis. The stock concluded Wednesday with a rise of more than 15%.
What do these two distinct entities, a digital currency and a media stock, share in common?
Not much, typically. However, in recent weeks, their values appear to be influenced by traders' assumptions about Trump's reelection chances.
To clarify: These investors don't have a psychic ability --- they're merely gambling, with varying levels of knowledge, on highly volatile assets.
Bitcoin investors are exhilarated due to the Republican candidate's reported 180 on the asset class he previously labeled a scam. Despite the lukewarm response and numerous technical issues upon Tuesday's launch of the Trump-promoted crypto platform World Liberty Financial, the former president has spent months engaging with the industry's top billionaires and providing favorable remarks.
This enthusiasm intensified on Wednesday as Trump expanded his lead over Harris on a crypto-focused prediction website named Polymarket. For these speculators, Trump has a 59% chance compared to Harris's 41%. (This is substantially different from national polls, including CNN's "Poll of Polls," which currently indicate a near tie.)
"As we approach the election, the voting estimates may create fluctuations in the market," explains Steph Guild, senior director of investment strategy for Robinhood. Bitcoin may benefit if Trump's odds improve, she suggested, "given he is perceived as more supportive of crypto in general."
Apart from the election prediction game, Bitcoin is also fueled by numerous broader economic factors. Notably: Central banks worldwide are reducing interest rates, making riskier assets such as crypto more appealing. Additionally, it is #Uptober, historically the period for digital assets to perform well.
"It's no surprise that it became even more politicized on both sides," states Adrian Fritz, global head of research for crypto firm 21shares. "Fortunately, it promotes awareness for the entire space ... We believe that, regardless of the outcome, it's a net advantage for the industry."
Trump Media, on the other hand, is also in the midst of a pre-election surge. However, it is in a league of its own when it comes to trading activity and volatility.
In the past week alone, the total number of available DJT shares for trading has been exchanged multiple times, with investors keeping the stock for an average of just two days, according to Barron's journalist Al Root. For comparison, Apple shares take over a year to fully replace.
This unparalleled volatility makes crypto look stable in contrast. However, it attracts a unique class of investors willing to buy during uptrends and sell before the peak. (This strategy may sound straightforward, but your financial advisor would suggest heading to the casino instead since you may find some enjoyment in playing cards while losing your money.)
The momentum trading is "absolutely" happening, Fritz states. "It's not just limited to retail investors but also to professional traders ... the basis trade is one of the most popular strategies when it comes to bitcoin," he added.
(This essentially means that hedge funds are using extensive leverage to execute intricate trades exploiting minor price discrepancies between Bitcoin's spot price and futures market prices, further fueling trading volume.)
In summary: Both Bitcoin and Trump Media could become even more turbulent in the coming weeks as more investors jump in. However, those seeking political indications from the market for the election outcome should remember: "Investors will trade." While some die-hard supporters might be channeling their funds into assets perceived as pro-Trump, the majority are simply maneuvering on the casino floor, attempting to adjust their bets and pocket a few victories.
Thebusiness world of Bitcoin and Trump Media shares seem to intertwine lately, as both are influenced by traders' speculations about the election outcomes. Specifically, the value of Bitcoin appears to be impacted by investors' beliefs about Trump's potential support for cryptocurrencies.
Despite being in different sectors, Bitcoin and Trump Media shares share a common factor in the recent pre-election surge, driven by traders who are treating them as gambling opportunities, unafraid of the market's volatility.
