Just how far can crypto-friendly campaign promises from former president Donald Trump carry Bitcoin? Potentially not far, writes 10x Research founder Markus Thielen, noting that other market factors may ultimately stymie whatever bump might be attributed to the presumptive Republican presidential nominee's embrace of crypto.

Bitcoin climbed by 4% over the weekend, bolstered by a mix of political and market factors, but there's still signs the boost is temporary. In its latest report, 10x Research pointed out that Bitcoin was "deeply oversold," with all three technical reversal indicators flipping to bullish. 

Thielen noted that the expected delay of spot Ethereum ETF trading approvals to around July 8 and President Biden's performance in the presidential debate may have contributed to the rally.

A significant driver behind Bitcoin's recent performance is political, he wrote. President Biden's decision to not to step down and allow other Democratic candidates to run against Trump has added an unexpected twist to the election dynamics. 

"Biden’s family is reportedly supporting his reelection candidacy," Thielen wrote, "and so is every Republican, as the prospect of Biden beating Trump in the November election appears small."

The political landscape adds further complexity. Polls indicate that even if Biden withdraws, other Democratic hopefuls like California Gov. Gavin Newsom would likely struggle against Trump. Despite Trump's contentious status, he remains a strong contender in Thielen's view.

"Although Trump is not the ideal choice for many Americans, he is the only viable choice (at the moment) and has enough popularity to win the election," Thielen suggested.

Biden’s confirmation over the weekend after consulting with his family, was a key factor in the recent Bitcoin rally per the 10x report. However, the report advises caution. July typically sees positive performance for Bitcoin, but weaker trends often follow in August and September.

"This keeps us alert that Bitcoin could still drop to $55,000 in the weeks ahead—despite the weekend pump," the report warned. 

Technical indicators also support this caution, with Bitcoin’s 21-day moving average at $63,750 and a moving stop at $68,900. The crucial support range of $61,500 to $61,800 is under close watch. External factors also pose risks. Bitcoin mining operations, particularly in Texas, face challenges from high summer temperatures, potentially leading to operational disruptions. 

Last year, major miners like Marathon Digital and Riot saw significant stock declines in July, and similar patterns could emerge this year, adding selling pressure as miners may need to fund their operations. Moreover, Bitcoin balances on exchanges have increased, signaling a potential readiness to sell. 

"Often, an increase in balances on exchanges signals a willingness to sell those once Bitcoin moves through the stop level or reaches a level seen sufficiently high to take profit," Thielen explained in the report.

This could account for the sharp price movements over the weekend. Liquidity indicators also suggest caution. Circle’s USDC stablecoin has seen significant outflows, indicating a shift from crypto to fiat.

Additionally, discrepancies in ETF flow data raise questions about market dynamics. For instance, while Farside reports $17.7 billion accumulated in BlackRock’s IBIT since January, BlackRock claims $18.4 billion, highlighting inconsistencies in the data.

Looking ahead, 10x Research sees a potential second Trump term as positive for Bitcoin, even if the short-term boost might not sustain BTC's price performance in the coming weeks.

"We certainly see Trump's leading in the polls as positive," Thielen wrote, "and if he wins the election (which appears likely), it will also be positive for Bitcoin and the industry."

Edited by Andrew Hayward