All Eyes on Trump vs. Harris—Could a Close Election Result Send Bitcoin to $80K?
Digital Asset Market: US election fever is on. Bitcoin is on track for a post-election breakout. The Options market indicates that Bitcoin could rally to $80,000 on Republican presidential victory before the end of the year. However, other cautious analysts feel that the current "Trump hedge" rally may not have enough macroeconomic support to lead to an all-time high for BTC.
The outcome of the U.S. election today will significantly impact the future of cryptocurrency in the U.S. The FIT21, Financial Innovation and Technology for the 21st Century Act, is championed by Republican representatives, who hope to pass it through the current Congress. In the Senate, the crypto industry has pumped $10s of millions to unseat Ohio Democratic Senator Sherrod Brown, the current chair of the Senate Banking Committee, and support Republican challenger Bernie Moreno. Crypto groups have donated nearly $100 million to House races, supporting Democrats and Republicans in different races through Fairshake, Defend American Jobs, and Protect Progress. Coinbase is one of the largest donors in this election cycle, donating more than $75 million to various PACs. If one party wins all three significant positions, there is a higher likelihood of a delay in passing legislation. At the same time, a split outcome may lead to more compromise and a potential for progress in the near future. While the Presidential elections are the most watched tagline, several congressional and senate outcomes are equally important.
Macro Economics: Eurozone inflation exceeded expectations in October, rising to 2% compared to the forecasted 1.9%. Higher prices for food, alcohol, and tobacco drove the increase. Core and services inflation both remained steady. These figures weaken the case for a more significant rate cut at the European Central Bank's upcoming meeting in December. Economic growth also exceeded expectations, with the ECB stating that disinflation was on track and unemployment remained low. As a result, a 25-basis-point cut in interest rates is more likely than a 50-basis-point one.
Equities: Stocks in the US were trading in the green on Election Day, with the tech-heavy Nasdaq Composite leading the gains. Amidst a close presidential race between Kamala Harris and Donald Trump, investors are bracing themselves for potential market volatility as the outcome may take days or weeks to clear. While a prolonged wait for results could bring short-term uncertainty, historically, it has not halted the long-term trend for stock gains. The dollar and Treasury yields remained steady after dropping on Monday, and the Federal Reserve is expected to announce a 25 basis point rate cut at its policy decision on Thursday. Earnings reports from Super Micro Computer and Ferrari are also on the agenda. Additionally, the prolonged strike at Boeing ended after workers voted for a new contract that offered a 38% pay hike. Despite this, the company's shares fell slightly.
The Fed and US Treasury: The Federal Reserve, led by Chairman Jerome Powell, has much at stake in the upcoming 2024 election. The next president will have the power to fill multiple open positions within the central bank, including potentially choosing the next head of US monetary policy. If Trump wins a second term, there is uncertainty about his involvement in the Fed's decisions. Still, he has indicated that Powell will be removed from the perch, and Trump loyalists have already been jockeying for the position. On the other hand, Harris has pledged not to interfere with the Fed's decisions, but there is speculation about whom she would choose for open positions. The current political climate suggests that whoever is elected on Tuesday will significantly impact inflation and the economy. In the end, various Trump statements may just be rhetoric since he, too, will want to be insulated from any wrong Fed decisions and would rather be in a position to blame.
The FF Futures market implies a 25 basis point cut at this week’s November meeting at 98% probability. At the Saudi Arabian Future Investment Initiative conference, a panel of CEOs discussed the possibility of the Federal Reserve implementing two additional interest rate cuts before the end of the year. Most CEOs were skeptical and did not believe this would happen. They cited potential inflationary factors such as public spending and tariffs for their predictions. Some CEOs, such as Jenny Johnson of Franklin Templeton and Larry Fink of BlackRock, believe there will only be one rate cut this year. They also noted that there was no longer talk of recession and that there is currently more embedded inflation in the world.
Geopolitical: Differences within Germany's government have intensified recently, creating divisions within the coalition. This week, talks between representatives are taking place to find a solution. Finance Minister Christian Lindner's paper on reviving the German economy has added to tensions within the coalition. The critical issue is the country's 2025 budget, which has a funding gap of several billion euros. If a solution is not reached, the coalition could break up, leading to a period of minority government under Chancellor Olaf Scholz and possibly snap elections in early 2025.
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On Kalshi’s presidential futures market, recent developments have tipped the odds slightly in favor of a Trump victory, moving from an even 50-50 split on November 3rd to a 56-44 advantage. This shift aligns with observed early voting patterns that favor Republicans, such as increased turnout in rural and male demographics. Elon Musk's tweet urging people to "vote like your life depends on it" reflects the heightened stakes many feel around the election. While these trends may signal Republican strength, it's important to remember that early indications aren't conclusive, and predictions remain speculative.
A Trump victory could strongly influence the crypto market, which many expect would experience a significant rally. Projections for Bitcoin (BTC) suggest the cryptocurrency could reach $80,000, potentially within a month following a Trump win. Market sentiment appears primed for a bullish turn should election results favor Trump, underscoring how political developments can heavily impact crypto valuations and trading volumes.
Amid these political shifts, there’s a focus on advancing initiatives like the FIT21 project, which aims to position the United States as a leader in digital currencies and payment transformations. Achieving such a leadership role is critical to maintaining the country’s competitive edge globally, especially as digital finance becomes more integrated into the economy. The success of these efforts could shape the financial landscape and the regulatory environment for digital assets, signaling the U.S.’s readiness to lead in financial innovation and stability in the digital age.
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