Cryptocurrency Market on Edge as Altcoins Face Risk Post-US Presidential Election

The conclusion of the recent United States presidential election has sent waves through the cryptocurrency market, as altcoins – smaller cryptocurrencies like Doge and Solana – face their biggest risk trade of the year. Donald Trump's victory, confirmed the day after Election Day, has already caused seismic shifts in the value of altcoins largely supported by the president's crypto-friendly stance.

Bitcoin, the primary cryptocurrency by market value, saw a 5.1% increase, reaching $70,537 this Tuesday, which falls shy of the all-time high of around $73,800 recorded in March. It’s been a successful year for Bitcoin, showcasing a more than 65% gain. Altcoins, however, have been trailing behind, with Dogecoin, the original memecoin, jumping an impressive 18%, largely fueled by Elon Musk's supportive comments and a potential new Department of Government Efficiency (D.O.G.E.).

Zaheer Ebtikar, founder of crypto fund Split Capital, suggests that while the election outcome is fairly inconsequential to Bitcoin's performance, it's a completely different situation for altcoins. "For altcoins, they may not recover as much if [Democrats had won]," Ebtikar stated. The pronounced boom or bust effect of the election on these smaller coins highlights the financial tightrope they walk amidst political change.

Historically, altcoins have tended to outshine Bitcoin in up-market cycles, particularly when investment rotates to smaller-cap coins following major Bitcoin rallies. Dogecoin has bucked the trend this year, nearly doubling in price, while most other altcoins have struggled in comparison.

Shiliang Tang, president of principal trading firm Arbelos Markets, maintains optimism for the markets, suggesting that post-election, attention will return to larger economic factors and Federal Reserve policies, pushing the market higher.

Options in the crypto market, however, signal an expected short-term volatility spike in anticipation of the election results. Vetle Lunde, head of research at K33 Research, points out the market's sensitivity to the election, noting potential short-term pricing pressure in case of a Democratic win. Nevertheless, Lunde remains confident this would be brief, given the supportive macroeconomic environment.

Bitcoin options expiries around the election were heavily contested, reflecting differing opinions over the election's impact on the market. Data from options exchange Deribit indicates that traders were hedging with pricier puts against a potential Harris win, while maintaining bullish positions on a Trump victory.

The cryptocurrency landscape is on alert as investors and analysts monitor how a Trump-led United States will guide market trends and regulate the burgeoning crypto industry. For now, altcoins remain at the center of the post-election crypto discussion as their future rests on evolving political and regulatory developments.