The Impact of Politics on Cryptocurrency
Bitcoin (BTC-USD) has reached an all-time high, peaking just above $69,000 before falling slightly. With the United States Presidential Election on the horizon, many investors are wondering what impact the results may have on the cryptocurrency market.
Anthony Scaramucci, SkyBridge Founder and Managing Partner, believes that President Trump is better for Bitcoin due to his support of the rule of law and democratic processes. However, Chief Investment Officer of IDX Advisor, Ben McMillan, believes that the politics of cryptocurrency will matter less at the presidential level and more at the state level.
The Crypto Community’s Perception of Trump and Biden
The crypto community generally sees the Trump administration as being more laissez-faire when it comes to crypto. On the other hand, Biden’s proposed infrastructure bill injects a lot of liquidity into the system, which could be favorable for crypto.
Bitcoin’s Unprecedented Rise
One significant difference this time is the presence of ETFs, which has made it easier for financial advisors to allocate Bitcoin to their portfolios. More investors are coming into the market via these ETFs, and Bitcoin is becoming part of the mainstream.
The Significance of Bitcoin’s All-Time High
Compared to the last all-time high in November 2021, this time, more breadth exists behind it. Politicians are starting to see the potential of cryptocurrency, and more countries are starting to adopt Bitcoin as a de facto currency, such as El Salvador. Those economies that start to experience inflations or hyperinflation will also start to adopt Bitcoin.
The Importance of the Bitcoin Halving
Historically, the Bitcoin halving has been significant, causing positive price action going into the halving and several months after. The additional catalyst of Bitcoin ETFs this time around makes it moderately creative, but not as important as before since 95% of all Bitcoins that will ever be mined are already in circulation.
Global Elections and Cryptocurrency Adoption
Smaller emerging economies such as El Salvador throwing their lot with Bitcoin is a compelling model that other countries may adopt. African and Latin American countries could adopt Bitcoin as a de facto central bank, while China’s Central Bank Digital Currency (CBDC) is an example of a government using a digital currency to control its population.
Hot Take: The Intersection of Politics and Cryptocurrency
The politics of cryptocurrency will matter less at the presidential level but more at the state level. Trump is perceived as being more flattering to the laissez-faire approach to crypto, while Biden’s proposed infrastructure bill is deemed favorable to it. With Bitcoin ETFs on the market, more financial advisors are allocating Bitcoin to their portfolios, introducing Bitcoin to the mainstream. Global economies may adopt Bitcoin as a de facto central bank or as a means for citizens to flee their home currencies. The significant difference this time around is that Bitcoin is becoming mainstream, making it easier to onboard a whole new audience, but caution is still necessary since macro regimes could impact further upside price movements in the near term.
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