First Mover: Bitcoin loves Biden (and Fed’s Powell) as the price approaches $ 15,000

Bitcoin has now doubled in price in 2020, after rising to over $ 14,900 early Thursday for the first time since 2018.

The cryptocurrency appears to have taken a boost from the more likely outcome of this week’s US election, in which a Democratic president is blocked from passing major initiatives (such as tax cuts) by a Republican-controlled US Senate. This could imply more monetary stimulus from the Federal Reserve, where President Jerome Powell is not expected to announce new stock Thursday after a two-day meeting this week, but it could signal a willingness to do whatever it takes to keep the economy and the markets on the track.

Investors are “favoring bitcoin as a hedge against political risks,” Lennard Neo, head of research for cryptocurrency-focused firm Stack Funds, told clients in a weekly newsletter.

In traditional markets, stocks rallied globally, Treasury yields fell, the dollar fell, and gold strengthened as investors reacted to the growing likelihood that a U.S. government led by the former Vice President Joe Biden may have difficulty implementing tax cuts, pushing the burden of financing new Treasury debt to the Federal Reserve more.

Experts on Wednesday singled out this week’s US election results as they were previously called too close to calling. President Donald Trump, suddenly seeing the all too real prospect of being labeled an underdog, has begun to raise legal challenges wherever possible.

And bitcoin? It took a victory lap.

Fears that electoral uncertainty could lead to a sell-off in the largest cryptocurrency were quickly replaced by bullish enthusiasm that some form of stimulus, both fiscal and monetary, would eventually push up prices for bitcoin. seen by many investors as a hedge against inflation.

The cryptocurrency has doubled this year as the Federal Reserve has pumped over $ 3 trillion of newly printed money into global markets. The Standard & Poor’s 500 index of US equities, by contrast, rose only 6.6%.

Yield dynamics may become sharper on Thursday as Fed officials release a statement on this week’s two-day closed-door monetary policy meeting. No major action is expected, but Jerome Powell is expected to reiterate his promise that the US central bank is ready to support the markets if needed to ignite an economic recovery from the devastating coronavirus toll.

“Tomorrow’s political announcement will likely affirm their dovish stance going forward by focusing on the status quo and avoid creating political uncertainty in the immediate wake of the election,” Denis Vinokourov, head of research for the first cryptocurrency broker, told First Mover. Bequant in an email.

On Wall Street Wednesday, traditional markets staged a relief rally as Trump’s Democratic challenger Joe Biden expanded his lead in the run, with apparent wins being called to Michigan and Wisconsin.

Bitcoin also appears to benefit, which makes sense given that Biden has pledged to push for at least $ 5 trillion in new government spending on initiatives related to education, housing, healthcare, paid vacation and infrastructure. . Apparently the Treasury Department would have to borrow money to pay for the agenda, and the Fed would likely have to print money to finance the extra debt.

Gridlock, with a divided Congress blocking major legislative initiatives, is seen by many investors as the happiest environment for business continuity and perhaps a bulwark against Biden’s proposed tax hikes.

“Because members of Congress are in charge of public spending, the puppet who serves as the nation’s leading figure tends to play a secondary role in fiscal and monetary policy,” Mati Greenspan, founder of foreign exchange and cryptocurrency analytics firm Quantum Economics, he told customers Wednesday in a statement.

What’s less clear is whether a spending bill, which the Fed says is needed to promote a rapid economic recovery, could be passed in the next couple of months if Trump loses. The Republican-controlled US Senate has proved reluctant to pass a large economic stimulus package over the past month even with Trump scrambling for a deal.

“If Biden achieves a win, Trump will have little incentive to finish a deal for another stimulus round, which could cause markets to sell off in the near term,” digital asset analyst Messari wrote in a statement Wednesday. . “This sale could result in bitcoin.”

That is if Trump agrees to go silent – hard to imagine given his combat record.

“Trump is now tweeting about how his lead has” magically “disappeared, setting the stage for a contested election that would likely result in further volatility in sight,” according to Messari.

The American electorate may be ready for a respite from the drama. Bitcoin seems to have a lot of energy.

Bitcoin rose to around $ 14,720, the highest since January 2018, representing over 100% year-over-year earnings.

While Joe Biden was leading the US presidential race, Congress is heading towards a split, meaning the long-awaited fiscal stimulus may be lower than previously expected.

“We may not know what a post-election stimulus might look like, but investors continue to believe the Fed will continue to print money at a pace that favors the finite supply of bitcoin,” John Kramer, a trader at the provider, told CoinDesk. of GSR cryptocurrency.

The compelling breakout of the cryptocurrency above the June 2019 high of $ 13,880 shifted attention to the record high of $ 20,000 reached in December 2017. This is because there is very little resistance between $ 13,880 and $ 20,000.

That said, the rally looks overwhelming with regards to technical indicators such as the 14-day relative strength index. While an overbought reading does not imply a bearish reversal, it often produces a temporary pause or pullback. The rising 10-day simple moving average (SMA) is the support to look out for in the short term.

Read More: Bitcoin Jumps Above $ 14.5K, Taking 2020 Earnings to Over 100%

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