Is the Controversy over the US Presidential Election Good or Bad for BTC?
As the election drama continues, Bitcoin has surpassed $14,000.
While parties on both sides of the aisle were confident that the US Presidential election would be a landslide in either direction, this week saw the election transform into a real nail-biter: while Joe Biden was ahead at press time, Donald Trump still had a path to victory.
At the same time, the Trump campaign has already made it clear that the current President will not accept a loss without a fight.
The Trump campaign has already demanded a recount in the state of Wisconsin, which Joe Biden won by less than a percentage point; the campaign further said that it would file suit in Michigan to halt vote counting there.
Is the 2020 Election a ‘Constitutional Crisis’ in the Making?
The state of Pennsylvania has also been targeted by the Trump campaign with a lawsuit to stop ballot-counting filed Wednesday. Additionally, Before any official results were announced, the president’s campaign also intervened at the Supreme Court in a case that challenged Pennsylvania’s plan to count ballots received until up to three days after Election Day.
Also on Wednesday evening, the New York Times reported: “Mr. Trump’s team added Georgia to its list of legal targets” with requests for a court order that would enforce strict deadlines in Chatham County. The request follows allegations by a Republican poll observer that a small number of ineligible ballots might be counted in one location.
As the election drama continues, the number of lawsuits and other attempts to halt vote counting is likely to grow. In other words, we are in for a wild ride.
Indeed, Kadan Stadelmann, Chief Technology Officer of Komodo, told Finance Magnates that “given that there’s still a handful of states that are undecided in the presidential race, tensions are certainly high.
“The continuous counting of mail-in ballots and possible lawsuits in key swing states could stretch to days or weeks, making for a constitutional crisis. Subsequently, there’s a good chance that neither party will accept the outcome if they are not in favour of the results.”
What does this mean for crypto?
“Political Uncertainty and Economic Uncertainty Go Hand in Hand.”
Kadan Stadelmann said that generally speaking, “political uncertainty and economic uncertainty go hand in hand.”
This time around, though, “it’s difficult to determine with certainty that there will be a negative effect on financial markets,” Stadelmann said. “Historically, S&P 500 volatility has been higher following an election as markets frequently reprice the probability of the future administration’s policies.”
So far this week, the election drama does not seem to have affected stock prices negatively, in fact, the opposite seems to be the case. A number of analysts have said that the upward movement in stock prices is due in large part to an apparent increase in the likelihood that Joe Biden will receive the 270 electoral votes needed to become the President-elect.
Additionally, there have been upward movements in cryptocurrency markets. Over the course of the last week, the price of Bitcoin has steadily moved up from around $13,200 to $14,341. Over the same time period, the collective market cap of all cryptocurrencies has increased from $394 billion to $410 billion.
“At This Point, You Could Elect a Martian President and Risk Assets Would Rally.”
However, it is unclear whether Bitcoin and other cryptocurrencies are being fueled by Biden’s current lead in the presidential race, or if the threat of a deeply contested election (and possible civil unrest to follow) could be what is propelling Bitcoin forward.
Jeff Dorman, Chief Investment Officer at Arca, believes that BTC’s upward journey is most likely due to the former.
“Markets hate uncertainty,” he said, particularly when it comes to risk assets. “Therefore, anything that clears up uncertainty is viewed positively by markets. Most investors can deal with negative outcomes, but they struggle to deal with uncertain outcomes.”
Therefore, “now that the election is (mostly) over and (seems) to be a victory for Biden, that uncertainty cloud is removed and people put money back to work.”
Arca published a report about this very phenomenon last month: “it appears that any news that clears up uncertainty will be met positively by market participants,” the report reads. “At this point, you could elect a Martian president and risk assets would rally simply because the uncertainty discount would be removed.”
“More Stimulus Is Coming Regardless of Who Is Elected.”
Therefore, the price of Bitcoin and other cryptocurrencies may have actually been held back in recent weeks and months because of the seeming uncertainty of the election. Now that things seem to be a bit more clear, BTC could continue to rise out of the veil of uncertainty and into new heights.
“Once uncertainty is removed, reality sets in that more stimulus is coming regardless of who is elected, and that brings USD weakness,” Jeff Dorman told Finance Magnates. “This is bullish for BTC.”
Indeed, Meltem Demirors, Chief Strategy Officer at CoinShares, told Finance Magnates that “partisan narratives aside, whether they are delivered in the form of tax cuts for corporations and the wealthy (Republicans) or in the form of government spending programs (Democrats), deficits are inevitable regardless of the outcome.”
