Bitcoin (BTC) was lower, searching for direction as uncertainty over U.S. election results hung over global markets. Prices were down about 2.2% to about $13,700, staying roughly in their range over the past week. 

With major states yet to be called in the U.S. presidential race and Republican incumbent Donald Trump accusing Democrats of trying to "STEAL" the election, the early read is that bitcoin prices are reflecting an increased likelihood of prolonged uncertainty or political gridlock that might hamper a quick economic recovery.

In traditional markets, yields on U.S. Treasury bonds fell by 0.11 percentage point, the most since April, signaling a shift toward risk aversion, or maybe a tempered expectation of outsize U.S. government borrowing. U.S. stock futures swung between gains and losses. The U.S. dollar was higher in foreign exchange markets. Gold weakened 0.7% to $1,895 an ounce. 

"With millions of votes in battleground states still being counted, it’s clear that the election is turning out to be messier and more drawn-out than Wall Street had hoped," according to Bloomberg News.

The U.S. presidential election is still in flux the morning after and might be for several days.  

In some ways, the prolonged uncertainty might have been entirely expected given how contentious the campaign has been, with a U.S. electorate that looks as divided as ever though apparently quite evenly split. But in other ways, the result was a short-term surprise for markets given investor expectations in recent weeks for a "blue wave" of Democratic victories that clearly did not materialize.

What's known is that the lack of a clear verdict represents what many investors feared would be a worst-case scenario for global markets.  

Here are a few takeaways for what it means for bitcoin traders:

1) Crypto traders playing in prediction markets appear to see Democratic challenger and former Vice President Joe Biden heading for a win:  

2) The "reflation trade" – where investors expected a quick economic recovery with ample government stimulus – now appears less likely. Democrats held the U.S. House of Representatives and Republicans are expected to hold the U.S. Senate, which could lead to disagreement over the size of a multitrillion-dollar coronavirus stimulus package whoever wins the presidency. That might be bad for bitcoin, since many investors see the cryptocurrency as a hedge against inflation. Ian Shepherdson, chief economist at the forecasting firm Pantheon, told clients in an email early Wednesday: "With Republicans still in charge in the Senate, we’d be surprised to see a stimulus bill early next year much in excess of $500B, far less than the $2T we expected if Democrats had won."

3) In some ways, the status of the presidential race appears in line with what many investors viewed as the worst-case scenario: an uncertain outcome with the potential to drag on. Trump says he wants the vote counting to stop, possibly seen as an admission that he suspects the final tally might reveal him to be a loser, and says he's going to take the matter to the U.S. Supreme Court. Given Trump's known combativeness and willingness to press for every advantage no matter how dubious, it could get ugly. That might mean markets trade for a while in a risk-off mood. In March, bitcoin prices tanked along with traditional markets when the initial coronavirus spread led investors to hunker down. 

4) Based on election night trading, it appears that crypto traders see a Biden win as more favorable for bitcoin than a Trump win. That might be due to the expectation that Trump's protectionist trade policies and antagonism toward China would, all things being equal, lead to a strengthening of the U.S. dollar in the short term. "There appeared to be an inverse relationship between Trump’s winning odds and bitcoin’s price," wrote the cryptocurrency-analysis firm IntoTheBlock.  

5) Market watchers may now start looking ahead to the Federal Reserve's regularly scheduled meeting on Thursday. No action is expected, but Chair Jerome Powell might use the occasion to stress his readiness to intervene in markets if the election uncertainty causes investors to lose nerve. That could mean more stimulus, in a year when the Fed has already expanded its balance sheet by three-quarters to more than $7T. And investor expectations that the stimulus will eventually lead to inflation has helped bitcoin prices to almost double this year.

6) As chronicled by CoinDesk's Nikhilesh De in an election-night live blog, several key crypto-friendly or at least crypto-familiar candidates won election to U.S. legislative seats. They included Senators Cynthia Lummis of Wyoming, Tom Cotton of Arkansas and Mark Warner of Virginia, as well as Representative Darren Soto of Florida. The races could have implications for crypto laws and regulations over the next several years as the industry matures. De's primer on races to watch is here. 

Bitcoin fell Wednesday alongside traditional markets after President Trump alleged “fraud” in the presidential election and pledged to stop vote counting.

The fall reversed a rally to $14,000 seen late on Tuesday, according to CoinDesk's Bitcoin Price Index.

The cryptocurrency had begun losing ground during the early Asian trading hours after media reports projected a victory for Trump in key states such as Florida, dashing hopes for a Democratic sweep and a bigger fiscal stimulus package under Biden's leadership.

But the latest assessment is that Biden likely wins if he carries two of the five states still too close to be called: Pennsylvania, Michigan, Wisconsin, Georgia and North Carolina, and prediction markets are giving him the nod. 

Bitcoin's price sell-off accelerated as Trump's threat to stop vote counting ramped up political uncertainty and sent a tremor through traditional markets. "We want the voting to stop," Trump said without evidence. "This is a fraud on the American public. This is an embarrassment to our country." 

That last statement might be one that all voters could agree on.

- Omkar Godbole

DeFi sell-off continues as index futures retrace to June levels (CoinDesk) 

Ethereum fees plumeted 65% in October, following DeFi volumes back to Earth (CoinDesk)  

Binance crypto exchange recovers $344K from scam DeFi project that launched on its platform (CoinDesk)  

Nearly $1B in bitcoin moves from wallet linked to Silk Road (CoinDesk)

Cruise-industry group extends suspension of U.S. operations through Dec. 31 (Reuters) 

Copper miner Freeport-McMoran, based in Phoenix, Arizona, considers getting rid of headquarters, arguing that staff are "showing we can get the work done remotely" (WSJ) 

Chinese President Xi Jinping says in high-profile speech to Communist Party's Central Committee that country's economy can double in size over next 15 years (Bloomberg)