Bitcoin knocks on $78,000 in V-shaped comeback as midterm election uncertainty fades

Bitcoin (BTC) has erased its early losses and is steaming higher as U.S. midterm election uncertainty fades.

The largest cryptocurrency fell to just under $76,000 early Wednesday as reports said Democrats were sweeping both houses of Congress. It has since staged a V-shaped recovery, erasing its early losses. As of this writing, the cryptocurrency traded 0.5% higher on the day.

The early drop was about uncertainty and the subsequent bounce represents fading of uncertainty, according to TDX Strategies' founder Dick Lo.

“Bitcoin dropped initially in response to the Democratic sweep of the midterm elections, but has since recovered as a clear outcome resolves political uncertainty,” Lo told CoinDesk.

Lo explained that a Democratic-controlled Congress is generally viewed as less favourable for pro-crypto legislation, and divided government makes major, market-unfriendly policy shifts unlikely.

Still, President Trump can “govern through executive orders while leveraging his veto authority to counter Democratic bills, he added.

Nicolas Quatravaux, head of EMEA at Paradigm, the leading institutional liquidity network in crypto derivatives, made a similar point.

“The result itself wasn’t really a surprise. Polymarket had a Democratic win above 75% for a while. So overnight was less about the outcome and more about the uncertainty going away,” Paradigm said.

He said that overnight options traders were busy.

“On election day we printed about $660m notional of BTC options blocks, more than double the day before. Roughly $420m of calls were bought vs about $105m sold,” Quatravaux said.

A call option is a bet that a price will rise. A put is a bet that it will fall. A block is a large trade negotiated privately and not placed on the open market.

Traders bought $230 million worth of bitcoin call options, betting on a rebound after the election result. Near the price low, others sold options to cash in on protective bets and profit from elevated volatility.

Markus Thielen, founder of 10x Research, expects more price gains. He pointed to bitcoin’s daily stochastics, a momentum gauge that shows when a price has fallen too far, too fast. Thielen said that, according to stochastics, bitcoin looked oversold and could climb toward $82,000.

“Bitcoin is rallying back as Trump has indicted that he will respect the election results and as US voters have voted against the war, there is now hope that peace negotiations will resume. Bitcoin is now oversold and should rally back towards the 82,000 level as its next target,” Thielen said.