By Manya Saini

(Reuters) -U.S. cryptocurrency shares fell in early trading on Wednesday after Democratic candidate Kamala Harris put her Republican rival and crypto supporter Donald Trump on the defensive in a combative presidential debate.

The former president had positioned himself as a pro-bitcoin candidate whose return could mark a win for the industry that has accused the current administration of regulatory overreach.

After the debate, pop megastar Taylor Swift said she will vote for the Democratic candidate to her 280 million followers in a post on Instagram.

"Following the performance of Harris in the debate and perhaps Taylor Swift's endorsement, there is a slightly lower chance of a crypto-supporting Trump in the White House," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Bets on a win for Harris improved to 56% from 53% before the debate, while Trump's chances slipped to 48% from 52%, according to online betting site PredictIt.

Bitcoin, the world's largest cryptocurrency, pared losses and was last down 2%, while ether fell 2.6%.

Trump had in July courted the crypto industry in a conference in search of donations and votes with a promise of friendlier regulation.

"Never sell your bitcoin," Trump said at the time, adding that if elected the U.S. government will hold bitcoin as a store of value.

Meanwhile, Harris has yet to detail a policy position on crypto.

In the run-up to the debate, many market participants and analysts viewed bitcoin as the asset to watch for clues on which candidate was gaining an upper hand.

"The U.S. presidential debate did not address crypto directly. However, market sentiment is shifting in favor of Kamala Harris," Valentin Fournier, analyst at research firm BRN.

"This creates a somewhat less optimistic outlook for bitcoin compared to the more enthusiastic projections made by Trump at the Bitcoin 2024 Conference."

The crypto market is often seen as a risky fringe business with high volatility and has been accused by the U.S. Securities and Exchange Commission of flouting securities laws.

But its mainstream appeal has improved, thanks to the support from Wall Street institutions and corporate titans like Elon Musk and the approval of U.S. exchange-traded crypto funds.

"We expect the uncertainty to hang over risk assets till November," Aurelie Barthere, principal research analyst, Nansen.

Crypto miners Riot Platforms Marathon Digital, and U.S.-listed shares of Hut 8 were down between 3.6% and 5.3%.

Software firm and BTC buyer MicroStrategy fell 5.4% and crypto exchange Coinbase Global and Blockchain farm operator Bitfarms were down 3.6% and 3.8%, respectively.

(Reporting by Manya Saini, Lisa Pauline Mattackal and Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur)