Bitcoin's Rise Driven by Trump’s Election Odds

After a 5% gain on Monday, Bitcoin is now up around 14% in October, exceeding $65,000. Analysts at Bernstein attribute this surge to the correlation with Donald Trump’s improving election odds, with MicroStrategy serving as a critical indicator for a potential bullish breakout.

> “We believe the recent bitcoin strength is being driven by the return of bitcoin’s correlation to Trump’s election odds,” wrote Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia in a note to clients.

Despite support for digital assets from both major parties, the crypto market appears to favor Trump’s improving predictions within the election markets. Currently, Trump is reported to lead Kamala Harris with odds of 55.9% to 43.8% for the upcoming presidential election on Nov. 5, according to Polymarket. Trump also leads in five out of six swing states.

Polymarket predicts a 78% chance for a Republican Senate, 56% for a Democratic House, and a 39% likelihood of a Republican sweep versus 16% for Democrats. Kalshi also indicates Trump leading Harris 55% to 45%. Bernstein analysts highlight that the current strength in the Bitcoin market reflects Trump’s rising odds.

However, national polling shows Harris ahead by 49% to 46%, within the margin of error, as of Oct. 12. Bernstein suggests Bitcoin could reach $80,000 to $90,000 if Trump wins, while a Harris victory could lead Bitcoin to test the $40,000 range again.

MicroStrategy as an Indicator of Bitcoin’s Strength

MicroStrategy’s stock has soared by 191% in 2024, outperforming Bitcoin’s 55%. The firm’s “bitcoin playbook” positions it as a leading indicator of bitcoin strength, akin to a corporate bitcoin index.

MicroStrategy capitalized on Bitcoin lows by issuing equity and convertible debt to purchase Bitcoin, and this strategy has paid off. Since 2020, the firm has aggressively acquired Bitcoin, holding 252,220 BTC now valued at over $16 billion, making it the largest corporate holder.

MicroStrategy's stock has mirrored Bitcoin's price movements, showing signs of a potential breakout recently. Founder Michael Saylor expresses confidence in becoming the leading Bitcoin bank, aiming for a trillion-dollar valuation.

Shift from AI Diversifiers to Bitcoin Miners

Analysts have noted a shift from AI diversifier stocks to pure-play Bitcoin miners amidst a bullish trend for cryptocurrency. AI diversifiers have performed well due to high demand for computing and hosting services, but pure-play Bitcoin mining firms are now gaining attention.

Despite earlier underperformance, stocks like Riot and CleanSpark have recently shown positive trends, up around 25% and 20%, respectively. Analysts believe that for pure-play miners to operate profitably, Bitcoin prices must reach all-time highs, particularly exceeding $90,000, to sustain margins against AI competitors.

Analysts from Bernstein suggest that as Bitcoin strengthens, pure-play miners will likely catch up with AI-focused firms. Gautam Chhugani has positions in various cryptocurrencies, and Bernstein may receive compensation for services from MicroStrategy.