(Bloomberg) -- Bitcoin missed out on a cross-asset rally stoked by dovish Federal Reserve comments as a tightening US election race casts doubt on whether Donald Trump will get the chance to implement his pro-crypto agenda.
The digital asset slid 2.4% on Wednesday, trailing a Fed-fueled surge in an index of the Magnificent Seven technology megacap stocks by one of the biggest margins in 2024. The token retreated further on Thursday, changing hands at $63,750 as of 6:10 a.m. in London.
The original cryptocurrency has become something of a proxy for Trump’s odds of returning to the White House after the Republican nominee pledged to make the US the “crypto capital of the planet and the Bitcoin superpower.”
Likely Democratic nominee Kamala Harris, riding a wave of enthusiasm among young, Black and Hispanic voters, has wiped out Trump’s lead across seven battleground states. Harris also now has higher odds of victory than Trump in the PredictIt market for betting on political outcomes. The Harris campaign has yet to detail a stance on the digital-asset sector.
Noelle Acheson, author of the Crypto Is Macro Now newsletter, flagged Harris’ “climbing fortunes” as a “political factor that could be suppressing” the digital asset’s price. Kyle Doane, head of trading at Arca, said some of the recent Bitcoin weakness may be due to Harris “inching up in the polls.”
Trump on Wednesday questioned Vice President Harris’ racial identity at a contentious roundtable at the National Association of Black Journalists convention in Chicago, fumbling an attempt to reach out to voters of color.
The Bitcoin wobble is a sign of a wider rethink in markets about the so-called Trump trades that hogged the spotlight last month when the former president appeared to have a better chance of victory in November’s US election.
Aside from politics, the crypto market of late has also been buffeted by the potential for disposals of Bitcoin seized by the US government and the risk that some creditors of the failed Mt. Gox exchange may sell recovered tokens.
Fed Chair Jerome Powell on Wednesday signaled the central bank is on course to cut interest rates in September unless inflation progress stalls. The prospect of looser monetary policy contributed to rallies in US stocks and bonds.
Bitcoin has climbed more than 45% this year, aided by inflows into US exchange-traded funds for the token. The rally cooled after peaking a record high of $73,798 in March, two months after the ETFs went live.
--With assistance from Olga Kharif.
©2024 Bloomberg L.P.