Bitcoin BTC/USD and Ethereum ETH/USD spot exchange-traded funds (ETFs) experienced substantial net outflows on Nov. 4, with the former seeing a record $541 million outflow, marking the second-largest single-day outflow in history.
The only higher single-day outflow was recorded on May 2, when $563 million exited Bitcoin ETFs.
Ethereum ETFs also faced significant withdrawals, with $63.2 million in net outflows, indicating a cautious market stance ahead of the U.S. presidential election.
What Happened: Data from SoSo Value shows that among Bitcoin ETFs, BlackRock’s iShares Bitcoin Trust IBIT saw inflows of $38.4 million, offering a bright spot in an otherwise bearish day.
In contrast, other funds witnessed substantial outflows, including Fidelity's FBTC, with a $169.6 million exit, and Ark Invest's ARKB, which saw outflows of $138.2 million.
Ethereum ETFs followed a similar pattern of net outflows.
BlackRock‘s ETHA registered the only significant inflow, adding $11 million, data shows.
However, the Grayscale Ethereum Trust ETHE and Fidelity's FETH reported outflows of $10.8 million and $31.5 million, respectively, underscoring investor caution across major crypto funds.
Market observers suggest that these movements reflect heightened investor caution as the U.S. election nears, with polls indicating a tight race between candidates.
Analysts from QCP Capital highlighted the "Trump trade," which has gained traction among traders, with many positioning long on the dollar, crypto, and expecting higher Treasury yields, in response to Trump's lead in several prediction markets.
A potential victory for Kamala Harris could reverse these trends, sparking sharp swings in crypto markets.
QCP Capital further noted that the crypto market anticipates a 3.5% movement in Bitcoin's spot price on election night.
However, the current low volatility premium beyond Nov. 8 suggests that traders might be underestimating potential post-election turbulence, particularly if the results are contested or delayed.
Also Read: $61,000 Is Bitcoin’ Line In The Sand For ETF Demand To Remain Steady, Says Analyst
Why It Matters: This heightened pre-election tension mirrors past election cycles, with significant market movements recorded in both 2016 and 2020.
In 2016, Trump's unexpected win initially led to a sell-off in U.S. futures, which quickly rebounded, resulting in the most active trading days of that half-year.
The 2020 election, meanwhile, wasn't called until four days after voting closed, prompting a spike in trading volume.
Additionally, QCP Capital noted the implications of the congressional races on broader market dynamics.
A Republican sweep could indicate higher fiscal deficits, possibly prompting a more hawkish stance from the Federal Reserve—an outcome that could weigh on risk assets.
In contrast, a divided Congress may lead to more tempered market reactions, with volatility potentially subsiding.
What’s Next: As the election unfolds, industry participants and crypto enthusiasts will gather at Benzinga’s Future of Digital Assets event on Nov. 19 to discuss the broader impact of these developments on the crypto market and explore strategies for navigating the evolving regulatory and financial landscape.
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