(Kitco News) – Financial markets got Friday off to a hot start, but the across-the-board gains were short-lived as asset prices trended lower into the close of U.S. markets, with stocks and cryptos struggling to fend off bearish forces while gold strengthened as the day progressed.
Bond yields continued to be the primary source of volatility as the U.S. 10-year Treasury note declined in the morning session, only to rally back to 4.25% in the afternoon to the detriment of risk assets.
This resulted in a mixed close for the major indices, with the Nasdaq gaining 0.56%, the Dow losing 0.61%, and the S&P finishing flat.
Cryptos, meanwhile, saw their recent gains quickly turn into losses after a report from The Wall Street Journal alleged that Tether, the company behind the world's largest stablecoin – USDT – was under criminal investigation by the Manhattan U.S. attorney's office over potentially breaking anti-money laundering rules and violating sanctions.
At the same time, the Treasury Department is also weighing sanctions against Tether because of the stablecoin's use by U.S.-sanctioned individuals and organizations, including the terrorist group Hamas and bad actors within Russia.
Market analyst Daan Crypto Trades highlighted the effect the news had on the crypto market, showing that Bitcoin’s (BTC) price turned sharply lower after the report was released and then bounced back to recover some of the losses after Tether CEO Paolo Ardoino said there was no indication that the company was under investigation.
#Bitcoin Brutal Newsflow & Price Action.
Market took out a lot of longs across the board there. pic.twitter.com/cHpvLSZ6Hk— Daan Crypto Trades (@DaanCrypto) October 25, 2024
Data provided by TradingView shows that Bitcoin underwent a 4.3% price swing after the news hit the press, falling from a high of $68,762 to bounce off a low of $65,816 before being bid back above $66,700.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $66,771 for a loss of 2.08% on the 24-hour chart.
Gold responded to the downturn in risk assets by climbing higher after trading in the red during the morning part of the session. At the time of writing, spot gold trades at $2,746.60 for an increase of 0.41% on the day.
Volatility expected until after the election
Aside from the impact of the Tether news, analysts are widely predicting volatility for cryptos headed into the U.S. elections as polls show the race is still too close to call while the campaign rhetoric is heating up.
“The political theater in the run-up to the US presidential election is getting out of hand,” said Tim Kravchunovsky, founder and CEO of Chirp, in a note to Kitco Crypto. “Now rumors are flying that Donald Trump has allegedly made pro-Hitler comments in the past - substantiated by nothing but hearsay - and Kamala Harris has jumped on this to call him a ‘fascist.’ It’s feeling more and more like a Hollywood movie rather than a serious political campaign.”
“This should be a stark reminder to us all that politicians only truly care about attracting and keeping your attention to gain your vote,” he added. “Both Harris and Trump will say anything they have to say to win support from the electorate, but whether they will deliver on their promises is another question entirely.”
Kravchunovsky said this is “especially true when it comes to crypto, which we can be sure neither candidate truly understands. And is this really any surprise? After all, governments across the globe have always been slow and inefficient when it comes to technological progress, so it’s foolish to expect anything different this time around.”
“That said, Trump has certainly promised more pro-crypto legislation than Harris, including turning Bitcoin into a reserve currency,” he noted. “Crucially, he also has Elon Musk on his side, who has long been an advocate of technological progress and is very familiar with crypto. His support could bring a lot of value to the Republican party and the regulatory policies around digital assets, more than any promises made by Trump on the campaign trail.”
Despite the understanding, or lack thereof, that each candidate has regarding cryptocurrencies and blockchain technology, analysts still see the election's outcome as having a material impact on the crypto market.
“The U.S. election can have a major impact on Bitcoin and the wider cryptocurrency market,” said Ryan Lee, Chief Analyst at Bitget Research. “Key factors like regulatory policies, economic strategies, and investor sentiment play a crucial role in shaping market dynamics. From a crypto and BTC perspective, it’s essential to understand the candidates’ stances on regulation, taxation, inflation, the economy, innovation, blockchain, and the approach to CBDCs and stablecoins.”
“If Kamala Harris wins, we could see more regulation but also increased innovation in blockchain technology and digital currencies,” he said. “This may create a more structured, compliant, and mainstream environment for cryptocurrencies, though it might also lead to short-term market volatility due to regulatory concerns.”
“On the other hand, if Donald Trump wins, it could result in less regulatory pressure but more market volatility tied to economic and foreign policy,” Lee said. “Trump has shown support for Bitcoin, and if his chances of winning are high before the election, a ‘Trump trade’ effect could emerge, driving institutional investors to profit through Bitcoin trading.”
“In both scenarios, broader economic policies like inflation control, monetary policy, and international trade will be critical in shaping Bitcoin’s price and the overall direction of the cryptocurrency market,” he concluded.
For now, volatility is the name of the game, and traders who cannot stomach the potential rollercoaster ride over the next two weeks are encouraged to wait it out on the sidelines until the political fog clears.
“By analyzing the #Bitcoin chart in the weekly timeframe, we can see that after the last analysis, when the price was trading around $66,500, I expected Bitcoin to find support at this level and continue rising, which is exactly what happened,” wrote TradingView analyst Arman Shaban. “Bitcoin has now gained over 5%, reaching $68,500.”
“We’ll have to see if the price can hold above $69,000 in the next two weeks,” he added. “If it does, we could potentially witness another rally and a new high above $74,000.”
And according to John Glover, Chief Investment Officer at Ledn, if Bitcoin can climb above $73,000, it’s expected to rise rapidly to $80,000.
“Yesterday’s dip to just below $65k was a perfect retest of the channel top that we broke out of last week,” Glover said in a note to Kitco Crypto. “As expected, that line (blue line in the chart) is now the support area and will provide the base for a short-term move up to retest the $73k previous high.”
“Once we have a solid break above $73k, I expect that we will see a rapid move toward $80k as the target for the completion of Wave III,” he added. “Note that I have reduced this target from the original $87k area. Once that target is achieved, I expect a small dip back below $70k before an attack on $100k in late Q1/early Q2 next year.”
Altcoins crash amid Tether scrutiny
The Tether-inspired pullback hit altcoins hard, resulting in all but 15 tokens in the top 200 recording losses.
Daily cryptocurrency market performance. Source: Coin360
Safe (SAFE) proved worthy of its moniker as the token increased by 14.7% to lead the gainers, followed by Gnosis (GNT), which climbed by 11.7%, and ConstitutionDAO (PEOPLE), which increased by 7.4%. Goatseus Maximus was the hardest hit, falling 12.4%, while Book of Meme (BOME) lost 11.8%, and Popcat (POPCAT) declined by 10.8%.
The overall cryptocurrency market cap now stands at $2.28 trillion, and Bitcoin’s dominance rate is 58%.
