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Quick Facts
The phrase “buy the rumor, sell the news” is a well-known adage on Wall Street, suggesting that investors would seek to profit from market movements by buying assets in anticipation of positive news, only to sell them once the news becomes a reality.
The “Buy the Rumor, Buy the News Effect: Will Bitcoin Break the Mold Again in the Wake of the US Presidential Election?
The phrase “buy the rumor, sell the news” is a well-known adage on Wall Street, suggesting that investors would seek to profit from market movements by buying assets in anticipation of positive news, only to sell them once the news becomes a reality. This phenomenon has been observed time and time again in various market cycles. However, the launch of US spot Bitcoin ETFs last year defied this convention, and with the upcoming US presidential election, will Bitcoin once again buck the trend and experience a “buy the rumor, buy the news” event?
The Unlikely Launch of US Spot Bitcoin ETFs
In October 2021, the first US spot Bitcoin ETFs were launched, which seemed to contradict the traditional “buy the rumor, sell the news” pattern. The anticipation and hype surrounding the launch had been building for months, with many investors eagerly awaiting the event. As the launch dates approached, the price of Bitcoin began to rise, fueled by speculation and expectations of increased mainstream acceptance of Bitcoin.
On the day of the launch, the excitement reached a fever pitch, with the price of Bitcoin surging to new highs as the first ETFs began trading. Instead of selling their Bitcoin positions, investors continued to buy, driven by the increased visibility and legitimacy that the ETFs brought to the cryptocurrency market. This ran counter to the traditional pattern, where investors would sell their positions once the news became a reality.
The 2024 US Presidential Election: A Potential “Buy the Rumor, Buy the News” Event for Bitcoin
Fast forward to 2024, and we find ourselves facing another significant event that could potentially defy the “buy the rumor, sell the news” pattern: the US presidential election. As the November 2024 election draws near, market watchers are beginning to speculate about the potential impact that the outcome could have on the price of Bitcoin.
Some of the key factors that could contribute to a “buy the rumor, buy the news” event around the election include:
- Regulatory Clarity: A new administration might bring about a clearer regulatory framework for cryptocurrencies, which could lead to increased institutional investment and mainstream adoption.
- Increased Mainstream Acceptance: A presidential endorsement or mention of Bitcoin in a campaign speech could help to further legitimize the asset in the eyes of the general public.
- Global Economic Turbulence: A period of economic uncertainty or even a recession could lead to investors seeking safe-haven assets, such as Bitcoin, as a store of value.
- Inflation Concerns: If the next administration pursues policies that drive inflation, the buying power of fiat currencies could decline, making Bitcoin and other alternative assets more attractive.
Pantera’s Take: Why Bitcoin Could See a “Buy the Rumor, Buy the News” Effect
According to Dan Morehead, co-founder and CEO of Pantera Capital, a leading cryptocurrency investment firm, the next US presidential election could indeed create a “buy the rumor, buy the news” event for Bitcoin.
In an interview with The Block, Morehead stated, “The next election is a huge ‘buy the rumor, buy the news’ event… If [a presidential candidate] is pro-regulation, but then they get elected and start doing pro-regulation things, that’s going to be a ‘buy the news’ event, and I think that’s going to drive Bitcoin price.”
Morehead’s argument is based on the idea that if a presidential candidate with pro-Bitcoin or pro-crypto views wins the election, the market will react positively, leading to a surge in price. This initial rally would be fueled by speculation and anticipation of the potential changes that the new administration could bring.
However, Morehead also notes that if the election outcome is uncertain or disputed, the “buy the rumor” phase could be longer and more intense, as investors seek to position themselves for potential changes in the market.
