Updated : Nov 09, 2020 in Bitcoin

How Joe Biden’s election could affect Bitcoin in the short term

Joe Biden’s presidency could initially have three effects on Bitcoin’s share price performance.

Yesterday, November 7, several news agencies declared Joe Biden, the Democratic Party candidate, the winner of the election and thus President of the United States, after four long days of counting votes.

Uncertainty about the outcome of the election is over, which is why cryptoanalysts can now look into the possible impact of a Biden presidency on the industry and on the Bitcoin share price. The three key drivers that can be expected are new economic stimulus packages, a strengthening US dollar and a resurgence of equity markets.
Bitcoin price chart.

Aid packages could also help Bitcoin

Prior to the election, incumbent President Donald Trump had announced that he would not hold talks on further economic aid packages until after the election. As a result, Democrats and Republicans had previously not been able to agree on a common denominator.

Biden’s victory increases the probability that a new aid package could be in place before the end of the year. The US Congress had already made financial injections of 2.2 trillion dollars in October. US dollars, but these were rejected by the Senate, in which the Republicans have a majority.

New corona aid payments could also have a positive effect on Bitcoin, as they would ease the financial situation for many households and companies in the USA. If the US economy is successfully boosted, the willingness of the investors increases again into speculative plant products to invest like the market-leading crypto currency.

The perception of Bitcoin changes thereby ever more from the speculative investment product to the safeguard against inflation. Nevertheless the Bitcoin course moves nevertheless often still in the Gleichschritt with the stock markets, thus even if the interest in speculative plant products does not return immediately again, an upswing of the economy could fire also the crypto market leader.

Strong US dollar would be bad for BTC

If the Biden government should indeed pass new aid packages, this will probably also strengthen the US dollar. When the European Union (EU), for its part, initiated aid payments, this boosted the euro, so it can be assumed that the US dollar will behave in a similar way.

The US dollar has been weakening against the reserve currencies since March. This has been to the advantage of value preservatives such as gold and Bitcoin, which trade in the currency pair with the US dollar and have been able to benefit from its weakness.

Should the possible aid payments thus boost the economy and strengthen the willingness of investors to invest, this would probably have a positive effect on Bitcoin initially, but a reinvigorated US dollar would exert selling pressure on the crypto currency in the long term.
Stock markets could pull Bitcoin along

The analysts assume that the stock market will recover more and more after the election results are confirmed.

Although many analysts fear that Biden will raise taxes, which in turn could cause a downturn in the stock markets, the probability is high that there will be a significant upswing initially.

In August and September, the stock markets had increasingly slipped when it became clear that the upcoming election would be more competitive than expected. It is unlikely that the actual outcome was the decisive factor in this downturn; rather, it was probably the fear that there would be a lack of clarity for some time after the election that scared investors away.

Now that the political duel is over, uncertainty will also evaporate, which could give a boost to the stock market and speculative assets such as Bitcoin.

Regarding the regulation of crypto-currencies, Jake Chervinsky does not expect the crypto-company Compound Finance to have any immediate impact, as Biden has not really taken a stand in this direction:

„The new president Biden has not yet publicly communicated a political position on crypto-currencies. For the moment the issue is still too insignificant for him to deal with it. So the next four years of crypto regulation will depend on who he designates for the relevant posts. Let’s wait and see.“

While the media have already named Joe Biden the winner, Donald Trump still has a trump or two up his sleeve that could further delay the official election results.

If this should happen, uncertainty may return, which would postpone the effects of the above-mentioned effects indefinitely.