As the United States gears up for its upcoming election, the cryptocurrency market is preparing for potential fluctuations that may affect major tokens such as Bitcoin and Solana. Investment firm 10X Research, under the leadership of Markus Thielen, has proposed a strategic “pair trade” to assist investors in navigating these uncertain waters: taking a long position on Bitcoin (BTC) while going short on Solana (SOL). This strategy is based on recent shifts in Solana’s network activity and anticipated regulatory changes following the election.
Why Consider Shorting Solana?
Despite Solana’s reputation for its rapid blockchain capabilities, some warning signs have emerged. Transaction fees on the Solana network have seen a significant decrease, dropping from $5 million in late October to just $2.5 million. For investors, this sharp decline in fees suggests reduced demand, a trend that historically does not favor token prices. This bearish signal has prompted 10X Research to recommend a short position on SOL in the near term.
How Election Outcomes Might Influence the Market
The upcoming election could have a profound impact on the crypto market. According to Markus Thielen, if Kamala Harris emerges victorious, the approval of U.S.-based ETFs linked to alternative assets like Solana might become less likely. Such a scenario could lead to a considerable drop for SOL, potentially around 15%. Bitcoin, as a more established cryptocurrency, might experience a smaller decline of about 9%.
Conversely, a Trump victory could alter the market outlook significantly. A Trump administration is perceived as more crypto-friendly, potentially boosting SOL, BTC, and Ether (ETH) by approximately 5%. Bitcoin and Ether, which already have spot ETFs trading in the U.S., may benefit further from Trump’s regulatory approach. However, Solana does not yet have a spot ETF, although major players such as VanEck and 21Shares are keen on obtaining approval.
Strategic Moves as Election Day Approaches
With the presidential race more competitive than ever, the long BTC-short SOL pair trade may serve as a prudent strategy to hedge against uncertainty. The current SOL-BTC trading ratio stands at 0.00235, highlighting investor caution as Election Day draws near. Whether the market will favor Bitcoin or Solana largely depends on the future occupant of the White House and their stance on cryptocurrency regulation.
Current Scenario for SOL Price
Presently, the price of Solana (SOL) is experiencing uncertainty as it hovers around the $160 horizontal support area, which previously acted as resistance. While the weekly chart continues to show bullish tendencies, daily indicators are suggesting bearish trends. The MACD has crossed into bearish territory, and the RSI is at risk of falling below the 50 mark. Should this occur, SOL could potentially decline to the ascending support trend line at $150.
Such a decline would indicate that the recent breakthrough above $160 was merely a temporary deviation, suggesting that the overall upward movement might be corrective. Therefore, although SOL has bounced back to $160, a further drop to $150 remains a possibility.
