How could the U.S. elections impact the dynamics of cryptocurrency assets? What should we expect?
The 2024 U.S. presidential election could significantly impact the dynamics of the cryptocurrency market, depending on the winner’s approach to regulation and support for digital assets.
📌Donald Trump’s Victory: Deregulation and Cryptocurrency Growth
Trump advocates for reducing regulation in the crypto industry, which could open opportunities for the growth of decentralized finance (DeFi) and stimulate market activity. He has also pledged to remove SEC Chair Gary Gensler and reduce regulatory interference. This approach could lead to rising prices for Bitcoin and other assets, as reduced regulatory pressure would increase liquidity and attract institutional investors to the crypto market. Additionally, a weaker dollar resulting from Trump’s softer monetary policy could boost demand for Bitcoin as a hedge against inflation.
📌Kamala Harris’s Victory: Regulation and Stability
Harris, following the current administration’s policies, is focused on strengthening cryptocurrency regulation to ensure transparency and consumer protection. Her administration may support the development of a Central Bank Digital Currency (CBDC), creating competition for decentralized cryptocurrencies. Although this policy might limit speculative trading, it could increase institutional investors’ confidence in the crypto market in the long term. Moreover, potential new requirements for stablecoins and stricter regulations on energy-intensive mining are likely to be introduced.
📌Market Reaction to the Elections and Volatility
The cryptocurrency market is typically highly volatile during election periods, as traders attempt to anticipate potential regulatory changes. Expectations of a Trump victory are already driving interest in Bitcoin and other speculative assets. Conversely, a Harris victory might lead to a temporary dip in prices due to fears of increased regulatory pressure, though it could also bring long-term stability to the market.
Overall, the results of the 2024 election will shape the direction of the crypto market: from liberalization and growth to stricter regulation and long-term legitimacy. Investors are closely watching the developments and preparing for potential significant price swings following the announcement of the results.
Historically, U.S. presidential elections have often coincided with notable changes in Bitcoin’s price, as shown in the graph (see Figure 1). For example, Bitcoin saw growth during the 2016 and 2020 elections, possibly due to heightened volatility amid expectations and uncertainty. Bitcoin generally trends upward when economic policies become less predictable, as investors seek safe-haven assets. Therefore, regardless of the election outcome, interest in Bitcoin traditionally rises during such periods, confirming a correlation between political events and cryptocurrency dynamics.
📌One Week Before the Election
On the weekly TOTAL3 chart (the market capitalization of cryptocurrencies excluding BTC and ETH), a breakout and close outside the correctional channel has been observed, which could act as a “trigger” for altcoin growth in the medium and long term. Volatility in the coming weekly bars is expected to significantly exceed average levels, potentially initiating a new upward “rally” for market participants.
Will a new “bull rally” happen again this time?
Stay ahead with Weld Money: As one of the leading players in the market, we bring you the latest insights and tools to navigate these changes. Let Weld Money guide you through the evolving crypto landscape with expertise and precision.
