Bitcoin surpasses $71,000 for first time since June; What’s driving the rally?

Bitcoin Price Today: Bitcoin surpassed $71,000 for the first time since June, driven by investments in dedicated exchange-traded funds and speculation regarding the potential results of next week’s US election.

The largest digital asset saw an increase of up to 2.7% before easing slightly, trading at $71,415 as of 7:57 a.m. on Tuesday in New York. Other cryptocurrencies, including the second-ranked Ether and the popular meme token Dogecoin, also experienced gains.

Bitcoin is considered by some to be a "Trump trade," as Republican presidential nominee Donald Trump has openly supported digital assets during his campaign. Currently, Trump leads in prediction markets, while polls indicate a tight race against Democratic candidate Vice President Kamala Harris.

According to Tony Sycamore, a market analyst at IG Australia Pty, the token is continuing to "price in a Donald Trump election victory." He noted that Bitcoin needs to maintain a position above $70,000 to bolster confidence that it can surpass March's record high of $73,798.

What's behind the rally?

Trump has pledged to position the U.S. as the global crypto capital, while Harris has taken a more cautious stance, promising to support a regulatory framework for the industry. Their views stand in stark contrast to the crackdown on the sector initiated by President Joe Biden.

Additionally, Trump has stated he would ask billionaire Elon Musk—one of his significant campaign donors—to lead an initiative aimed at reducing government spending, informally called the Department of Government Efficiency (DOGE), referencing the Dogecoin token that Musk endorses.

Musk’s involvement with the Trump campaign has reportedly boosted trader sentiment, according to Arisa Toyosaki, co-founder of Cega, a crypto derivatives service provider.

Options traders are increasingly betting that Bitcoin will hit $80,000 by the end of November, regardless of the election outcome. Implied volatility is high leading up to Election Day on November 5. This month, U.S. spot Bitcoin ETFs have garnered approximately $3.6 billion in net inflows.

Recently, Bitcoin has managed to withstand reduced expectations for Federal Reserve interest-rate cuts and reports of heightened scrutiny on Tether, a stablecoin crucial to crypto trading. So far in 2024, the original cryptocurrency has surged by 69%.

(With inputs from Bloomberg)