The long and hard-fought US elections have seemingly come to a close with former vice president Joe Biden in line to take over from Donald Trump. During the voting and drawn-out vote counting, markets were in a state of flux at the uncertainty, but that has all changed now.
The election of Biden, a Democrat, means the markets now have more of a footing to understand the next four years in the US, a powerhouse in global economic policy. Biden and his team will also have to try and navigate a tricky time for US markets and globally.
At the same time, Bitcoin, as an asset not tied to the US or traditional market technically, there is still a lot of consideration that needs to happen as it is not the anti-correlated asset many would have hoped it to be at this stage.
There are a few considerations to consider now that we know where the presidency will become in January 2021.
We have already seen one economic stimulus from the US under Trump, but a second one got stuck along the way and faced push back. Now, with Biden, it is likely a second-round will come through and this could actually be a good thing for Bitcoin.
The second round of stimulus could positively affect Bitcoin because it significantly relaxes the financial conditions in the U.S. It would also uplift the U.S. economy, and in turn, stimulate investor appetite for high-risk assets.
The perception of Bitcoin has evolved from a risk-on asset to a safe-haven asset and an inflation play in recent months. Despite this, there are still multiple instances where Bitcoin price moves in tandem with the stock market so in the absence of appetite for risk-on assets, Bitcoin price can still rise.
This stimulus may also bolster the dollar, which has been struggling against reserve currencies. As such, there is a possibility that a second round of stimulus and improving investor confidence could initially have a positive impact on the price of Bitcoin. It is also important to note that over time, the strengthening dollar could apply additional selling pressure on Bitcoin and gold.
Stock market back on track
The certainty that has been reached for the known election result means that there is opportunity for the stock market to move again. However, Biden’s tax and environmental policies may eventually lead to a stock market slump, but there is a high probability that stocks may rally in the short-term.
Interestingly, Bitcoin and the crypto space may well carry on unhindered by Biden who has made no calls either way on his opinion of the financial technology space.
Compound Finance’s general counsel Jake Chervinsky said: “President-elect Biden hasn’t said anything publicly about his views on crypto. For now, it really isn’t a big enough issue to warrant his attention. The next four years of US crypto policy depends on who he appoints to key positions; we’ll know more as the transition gets going.”