Bitcoin 'Trump Trade' Gains Momentum as BlackRock's ETF Sees $1 Billion in Inflows

As the 2024 presidential election approaches, Bitcoin exchange-traded funds (ETFs) are witnessing a surge in inflows, with over $1.8 billion pouring in this week alone, marking one of the best weeks for spot Bitcoin ETFs in recent months, according to CoinShares data. This uptick comes as the election race intensifies, particularly with recent polling indicating a shift in voter sentiment.

Market Signals and Election Dynamics

Recent data from the U.S. Census Bureau revealed a 2.9% month-over-month decline in building permits for September, a bearish indicator concerning the strength of the U.S. housing market and overall economy. Economists had initially projected only a 0.1% drop.

Meanwhile, an ABC/Ipsos poll conducted between October 4-8 showed Vice President Kamala Harris with a narrow lead of 50% compared to former President Donald Trump's 48% among likely voters. However, with only 17 days left until Election Day, traders appear to be positioning themselves favorably towards a potential Trump victory.

Trump has emerged as a vocal supporter of cryptocurrency during his campaign, portraying himself as a defender of digital assets. His promises include backing U.S. Bitcoin miners and expressing intentions to dismiss Securities and Exchange Commission (SEC) Chair Gary Gensler.

ETF Inflows and Market Reaction

This week, BlackRock’s spot Bitcoin ETF alone attracted over $1 billion, marking its sixth-largest week of inflows on record, based on partial-week data. This trend is not isolated to BlackRock; other asset managers have also reported significant inflows. Grayscale's Bitcoin Trust, for instance, has recently flipped positive in daily net flows, achieving this status only 14 times before a three-day streak this week.

As Bitcoin's price rose by 2% on Friday, nearing $69,000—the highest it has been in over two months—open interest for Bitcoin futures on the Chicago Mercantile Exchange increased by 8.7% since Monday. This suggests a growing “basis-trade” among institutional investors, who are gaining exposure to Bitcoin’s spot price through ETFs while simultaneously selling futures.

Betting Markets and Election Odds

On Polymarket, Trump's odds of winning have risen to 60% over Harris, up from 54% on Monday. Bitwise Senior Investment Strategist Juan Leon noted a significant acceleration in inflows, correlating with increased betting activity on the platform.

Tom Dunleavy, a partner at the crypto investment firm MV Global, echoed this sentiment, stating that spot Bitcoin ETF inflows have closely tracked Trump's rising election odds over the past couple of weeks. He remarked, "It’s becoming increasingly clear that the market views a Trump victory as extremely positive for the industry. The inflows into Bitcoin show an almost 1:1 correlation with the increase in Trump's election odds."

As the election date nears, market participants will continue to closely monitor the interplay between political developments and Bitcoin's performance, particularly as sentiment shifts and strategies evolve in anticipation of potential outcomes.