As the United States election approaches, the crypto market is gearing up for a period of potential volatility. Investors are keenly observing major digital tokens such as Bitcoin and Solana, bracing for the impact of political changes. A strategic approach has been proposed by 10X Research, under the leadership of Markus Thielen. Their recommendation is a “pair trade” strategy: going long on Bitcoin (BTC) while shorting Solana (SOL). This method is based on recent trends in Solana’s network activity and anticipated regulatory shifts post-election.
Why Consider Shorting Solana?
Solana, known for its rapid blockchain technology, has recently shown some concerning indicators. Transaction fees on the Solana network have significantly decreased, dropping from $5 million in late October to $2.5 million. This reduction signals a decrease in demand, a trend that historically predicts a decline in token prices. For investors, this is a bearish signal. 10X Research interprets this cooling of transaction fees as a justification to consider shorting SOL in the short term.
Potential Election Outcomes and Market Impact
The outcome of the election is poised to have a substantial impact on the crypto market. According to Thielen, a victory for Kamala Harris could lead to a decreased likelihood of U.S.-based ETFs tied to alternative assets like Solana being approved. This scenario could result in a significant drop in SOL’s value, possibly by around 15%. Bitcoin, being a more established and stable asset, might experience a smaller decline, potentially around 9%.
Conversely, if Donald Trump wins, the situation could be more favorable for cryptocurrencies. A Trump administration is perceived as more crypto-friendly, which could boost SOL, BTC, and Ether (ETH) by approximately 5%. Bitcoin and Ether, both having spot ETFs trading in the U.S., might benefit further from Trump’s approach to regulation. However, Solana lacks a spot ETF, although major firms like VanEck and 21Shares are actively seeking approval.
A Strategic Move as Election Day Approaches
As the presidential race intensifies, adopting a long BTC-short SOL pair trade could be a prudent strategy to hedge against market uncertainties. The current SOL-BTC trading ratio stands at 0.00235, reflecting investor caution as Election Day approaches. The market’s direction, favoring either Bitcoin or Solana, will likely hinge on the future president’s stance on cryptocurrency regulation and policy.
Solana’s Price: The Current Landscape
Currently, Solana (SOL) is navigating a phase of uncertainty as it lingers around the $160 horizontal support level, a former resistance point. On the weekly chart, SOL remains bullish, yet daily indicators are displaying bearish tendencies. The MACD has crossed into bearish territory, and the RSI is at risk of falling below the 50 mark. Should this occur, SOL may decline to the ascending support trend line at $150. Such a decrease would suggest that the recent breakout above $160 was merely a temporary deviation, indicating that the overall upward trend might be corrective. While SOL has rebounded at $160, a further drop to $150 is plausible.
