On November 7th, several major media outlets announced that after four days of rigorous vote counting in major battlefield states, Joe Biden had managed to get enough votes to become the 46th President of the United States.
As the excitement subsides over an incredibly tight election, analysts will take a closer look at how a Biden presidency can affect traditional markets and Bitcoin price. Three important factors to consider are the possible adoption of a new round of economic stimulus, a strengthening of the US dollar, and the possibility of a rebound in equity markets.
Economic stimuli could drive Bitcoin higher
Before the election, US President Donald Trump said he intends to postpone stimulus discussions until after the election. As a result, the Democrats and Republicans struggled to reach consensus on an agreement.
The choice of Biden increases the prospect of a stimulus package by the end of the year. Democrats in the US Congress proposed a US $ 2.2 trillion stimulus plan back in October, but found no support in the Senate.
The second round of economic activity could have a positive effect on Bitcoin as it eases financial conditions in the US significantly. This would also boost the US economy and in turn stimulate investor appetite for risky assets.
The perception of Bitcoin has gone from being a risky asset to being a safe haven and an inflation game over the past few months. Even so, there are still several instances where bitcoin price moves in parallel with the stock market, so bitcoin price can still go up without an appetite for risky assets.
Rising US dollar
If the Biden government approves a stimulus package, the US dollar will rise. In the euro zone, for example, the euro rose rapidly after a major stimulus proposal was passed.
The US dollar has underperformed the reserve currencies since March. As a result, it helped the recovery of gold, bitcoin, and other alternative stores of value as they are valued against the dollar.
Therefore, there is a possibility that a second economic cycle and an improvement in investor confidence will initially have a positive effect on the Bitcoin price. It’s also important to note that the stronger dollar could put additional selling pressure on Bitcoin and gold over time.
Equity markets may rebound now that the election is “solved”.
Analysts also expect the US stock market to rebound after the election result is confirmed.
While many analysts believe that Biden’s tax and environmental policies could ultimately lead to a stock market slump, there is a high likelihood that stocks will rebound in the short term.
The stock market fell sharply in August and September as analysts warned of a controversial election. It is unlikely that speculation about the election result resulted in a sell-off of the risky assets.
The fear that the election would drag on without a clear winner made the markets rattle.
After the 2020 race ends, there is less uncertainty in the markets and this could allow stocks to rally alongside other risky assets.
On the regulation side, Jake Chervinsky, General Counsel of Compound Finance, said Biden did not express a public stance on crypto. He wrote:
“President-elect Biden has not said anything publicly about his views on crypto. Right now, it’s really not big enough to warrant his attention. The next four years of US crypto policy will depend on who he appoints for key positions. We’ll know more when the transition begins. “
While the media has announced that Joe Biden is the 2020 election winner, President Trump has yet to admit, and it is widely expected that Trump’s legal team will contest the results and try to force a recount in every battlefield state.
If so, fear and volatility could re-enter the markets quickly, leading to a decline in stock and crypto prices.