Major media outlets have declared Joe Biden the winner of the 2020 election, leading analysts to speculate on how Biden’s presidency could impact the price of Bitcoin in 2021
On November 7, several major media outlets announced that after 4 days of rigorous vote counting in key states on the battlefield, Joe Biden had managed to secure enough electoral votes to become the 46th president of the United States.
As enthusiasm for an incredibly fierce election begins to wane, analysts will examine more closely how Biden’s presidency can impact traditional markets and the price of Bitcoin.
Three key factors to consider are the possible passage of a new round of economic stimulus, the strengthening of the US dollar and the possibility of stock market recovery.
Economic stimulus may drive Bitcoin higher
Before the election, US President Donald Trump said he wanted to postpone discussions on stimulus until after the election. As a result, Democrats and Republicans fought to reach a consensus on an agreement.
Biden’s election sheds light on the prospect of a stimulus package by the end of the year. Democrats in the US Congress already proposed a $2.2 trillion stimulus bill in October, but failed to win Senate support.
The second round of stimulus could positively affect Bitcoin because it significantly relaxes financial conditions in the US. It would also boost the US economy and in turn boost investors‘ appetite for high-risk assets.
Bitcoin’s perception has evolved from a risky asset to a safe haven asset and a game of inflation in recent months. Nevertheless, there are still several cases where the price of Bitcoin moves in tandem with the stock market, so in the absence of appetite for risky assets, the price of Bitcoin may still rise.
US Dollar on the rise
If the Biden government approves a stimulus package, the US dollar will rise. The euro area, for example, has seen the euro rise rapidly after approving a major stimulus proposal.
The US dollar has been underperforming against reserve currencies since March. As a result, it has helped the recovery of gold, Bitcoin and other alternative reserves of value as they are priced against the dollar.
As such, there is a possibility that a second round of stimulus and investor confidence improvement could initially have a positive impact on the price of the Bitcoin. It is also important to note that, over time, the strengthening of the dollar could apply additional selling pressure on Bitcoin and gold.
Stock markets may rise now that the election has been ‚resolved
Analysts also predict a recovery in the US stock market following the confirmation of the election result.
While many analysts believe that Biden’s fiscal and environmental policies could lead to a decline in the stock market, there is a high probability that stocks could rise in the short term.
The stock market fell sharply throughout August and September, as analysts warned against a contested election. Speculation surrounding the election result is unlikely to have fuelled a sale of risky assets.
Instead, fear that the election would drag on without a clear winner made the markets tremble.
After the 2020 race is over, there is less uncertainty in the markets and this could allow stocks to recover alongside other risky assets.
In terms of regulation, Compound Finance’s general board, Jake Chervinsky, said that Biden did not express any public position on crypto assets. He wrote :
„President-elect Biden has not said anything publicly about his views on crypto. For the time being, it is really not a big enough problem to justify his attention. The next four years of US encryption policy depend on who he nominates for key positions; we will know more as the transition continues. ”
Although the media has announced that Joe Biden is the winner of the 2020 election, President Trump has not yet given in and it is widely expected that Trump’s legal team will challenge the results and attempt to force a recount in each state on the battlefield.
If this occurs, fear and volatility can quickly re-enter the markets and lead to a downturn in stock and crypto prices.