Was it the elections? 4 reasons why the price of Bitcoin increased by 2% in 30 minutes

The price of Bitcoin rose by 2% in 30 minutes as the election caused great volatility in the US stock market.

The price of Bitcoin (BTC) rose by 2% in just 30 minutes just as the US stock market rang its opening bell on November 3. During the pre-market, the Dow Jones rose more than 350 points like it did on US election day, causing massive volatility.

The four reasons that probably led to Bitcoin’s upward trend in such a short period are the election, a stock rally, negative financing and increased currency outflows.

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Elections trigger volatility
The US elections are today, but the result is not a foregone conclusion. Polls suggest that Joe Biden has a lead in the major swing states.

The election is positive for Bitcoin for two reasons. First, a Biden or Trump victory would benefit BTC in the short term, according to industry figures.

Tyler Winklevoss, the CEO of the Bitcoin exchange, Gemini, said:

„Both political parties are addicted to the Fed’s money printing press, so regardless of who wins the election, the only real long-term winner will be #Bitcoin“.
Tom Lee of Fundstrat Global Advisors said that stocks could rise by 10% with a Biden victory. In that case, risky assets would probably recover, eventually benefiting Bitcoin. But, if Trump wins, Lee said stocks could see an even greater rise of 15% to 17%.

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Meanwhile, Goldman Sachs issued a Bitcoin Bank note earlier this month suggesting that „a blue wave would probably prompt us to improve our forecasts“. Although experts are divided over the potential impact of the choice on the stock market, it seems that both scenarios would be beneficial to BTC by the end of the year.

US stock market recovery coincides with BTC rebound
When the Dow Jones saw a 350 point increase in the previous market, the BTC price rose from around $13,500 to $13,730 in 30 minutes.

Although Bitcoin has shown a declining correlation to US stocks in recent weeks, during an uptrend, BTC and stocks are likely to rise in tandem. While Bitcoin is considered a reserve of value, both BTC and stocks remain risky assets.

A rising stock market could mean that markets are ambivalent about the eventual winner of the election.

Short sellers taken by surprise
When the sudden increase in Bitcoin occurred, the funding rate for BTC futures at Binance Futures was below 0%.

The crypto currency futures exchanges implement a mechanism called „funding“, which provides an incentive for the market minority. If the number of short sellers is greater than the number of long buyers or holders, the sellers must pay fees to the buyers every eight hours.

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But when the price of Bitcoin goes up and there’s also an additional incentive to buy or purchase BTC, there could be a small contraction. Considering that BTC increased by 2% in less than an hour, the dominant cryptomone currency experienced a large short contraction.

Currency outflows are increasing
According to data from CryptoQuant, a chain market analysis company, outbound trade registered the largest increase this year at approximately 30,000 BTC.

Flow of Bitcoin outflows on exchanges. Source: CryptoQuant
Traders deposit Bitcoin on exchanges when they want to sell their holdings. Therefore, when capital flows from exchanges, it means that traders, whales and retail investors intend to hold their BTC holdings for a long period.

The combined factors of a short contraction, electoral uncertainty, an upward trend in the stock market and increasing foreign exchange outflows contributed to the sudden increase in the price of BTC.

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