Bitcoin found stability above $80,000 as Zcash surged almost 12% to lead the overall crypto rally. After an initial sell-off due to Democrats winning both houses of Congress in the midterms, the price of crypto has bounced back quickly as traders turned their attention to lower energy prices and the likelihood of an earlier resolution to the Iranian conflict.
Bitcoin traded around $80,484 in Asian hours, up 5.7 percent over 24 hours after briefly sliding toward $75,700 as the election results became clear early Wednesday. Ether rallied around 8% to $2,425. XRP, Solana, and BNB posted more modest advances. Zcash stood out, climbing 11.7 percent to around $1,318 on $1.2 billion of volume. Despite the privacy coin having issues within its community about growing political risks, the coin outperformed the majors.
This rally was mirrored by the S&P 500 rising 1.6%. The dollar fell and Brent crude fell over 8%. “The price of Bitcoin has rallied alongside the stock markets as markets believe there is a higher chance of the Iranian conflict and high oil prices coming to an end due to the democrats wanting to de-escalate the situation. This could mean overall lower energy prices which may help inflation and reduce costs for businesses,” said Jeff Mei, COO at crypto exchange BTSE.
The initial fall did demonstrate some real concerns. With a democratic majority we are more likely to see the CLARITY Act (market structure act) stalling as it stands. As the influential critics of the act, such as senator Elizabeth Warren are in a position to be more involved in oversight. The industry did spend heavily but couldn’t prevent many of those who have been sceptical about crypto returning. “It is unlikely that the act will pass in this state and rate cuts seem unlikely,” Mei added.
However, given how quickly the market has bounced back it seems that politics was not a large concern. The overall uncertainty surrounding the election has subsided and the fall in oil has provided a clear positive. Over and over again we see crypto rally to look more like a high beta risk asset than a regulatory play. This demonstrates how correlated to stocks crypto can be.
You Might Be Interested In:
- Benefits and Risks of Cryptocurrency: A Complete Guide
- The Future of Blockchain Beyond Cryptocurrency
- How Businesses Can Use Cryptocurrency
The Zcash rally was also influenced by a policy memo highlighting the coin could face increased scrutiny. “There may be increased scrutiny around financial privacy and illicit finance. We believe private payments are safer for consumers, keep business information private and protect civil liberties.” said the memo, which was published on their community forum.
This was also timed well. The NU7 upgrade to the Zcash network is expected to go live around Friday. This means that the target block times will fall from 75s to 25s. This means exchanges requiring 3 confirmations will have their confirmation times fall from nearly 4 minutes to around 75 seconds. However this does not impact the overall issuance. The upgrade introduces a system that will put some fees into a longer term sustainability fund. Traders seem to have bought into this upgrade despite the privacy features facing potential push back from politics.
Ultimately this demonstrates how resilient crypto can be. Having Democrats in control of both houses means we have a split government with a Republican president. This can cause major legislation to be slowed down whilst creating more investigations. Crypto related investigations and amendments to existing proposals are likely to be looked at more closely now the new congress is in place in January. However there are areas of bipartisan support within the industry and we have seen markets take hits from politics when the macro environment is favourable.
For investors, this demonstrates how resilient crypto can be. Bitcoin was able to rally back to $80,000 having hit a multi week low. Zcash leading the charge demonstrates that progress is being made at a protocol level despite the political calendar. However, this rally has been driven by oil prices, a weaker dollar and stocks. If we see a re acceleration in energy prices this could quickly reverse.
