Investing.com-- Bitcoin’s price dropped on Tuesday, pulling back from recent three-month highs as broader risk aversion- in anticipation of a tight U.S. presidential election- spilled over into cryptocurrency markets.
While speculation over a Donald Trump victory had initially boosted crypto prices, recent polls pointed to a tight race between Trump and Vice President Kamala Harris, denting risk appetite. Broader risk-driven assets retreated, which in turn weighed on sentiment towards crypto.
Strength in the dollar also pressured crypto prices, while safe haven demand saw gold hit record highs.
Bitcoin fell 1.8% to $66,974.0 by 09:12 ET (13:12 GMT). The token had risen as far as $69,000, but failed to break above $70,000, which was expected to mark a bullish turn for the token.
Election uncertainty weighs on Bitcoin
The world’s largest cryptocurrency was pulled off recent highs by increasing uncertainty over the U.S. elections, with just about two weeks left to the ballot.
Improving odds for Trump had been a key driver of crypto’s price gains in the past week, especially given that the Republican candidate has maintained a largely pro-crypto stance.
Encouraging comments from Harris- on potential crypto regulation- also buoyed sentiment.
But analysts now saw the 2024 race as too close to call, sparking broader uncertainty in risk-driven markets and pushing traders more towards safe havens such as gold and the dollar.
Prediction markets still leaned largely towards a Trump victory, with Polymarket showing Trump at a 63.7% chance over Harris’ 36.4% chance.
Institutional interest in Bitcoin rising, futures data suggests
Open interest (OI) in Bitcoin futures on the Chicago Mercantile Exchange (CME) has soared to a new all-time high as of Oct. 18, exceeding $12.26 billion. This represents a marked jump of over 36% in the past two weeks and tops the previous record, set in April, by more than 3.5%.
The recent surge in OI represents a notable uptick from the levels seen during the summer, with the current figure being the highest since April 1, when CME's OI reached $11.84 billion.
This growing activity in CME futures suggests that institutional investors are increasing their positions, likely in anticipation of continued volatility or a potential rise in Bitcoin prices.
Open interest refers to the total number of unsettled futures contracts. A record high in OI indicates a growing number of market participants engaging in Bitcoin futures trading.
Rate uncertainty pressures crypto prices
Bitcoin and broader risk-driven assets were also pressured by increasing conviction that the Federal Reserve will cut interest rates at a slower pace in the coming months.
This notion put the dollar at near three-month highs and boosted Treasury yields, which in turn pressured speculative, risk-driven assets. Traders were also seen pricing in a higher terminal rate for the Fed.
Crypto price today: altcoins track Bitcoin losses
Broader crypto markets also retreated, tracking declines in Bitcoin. World no.2 crypto Ether fell 2.7% to $2,621.12.
ADA and MATIC fell between 0.3% and 3%, while XRP lost 3.5%.
Among meme tokens, DOGE slid 2.8%.
Ambar Warrick contributed to this report.