Diverging Bitcoin: Role Of US Presidential Election, Fed Rate Cut In Establishing New All-Time Highs

During its existence, Bitcoin has gone through three US Presidential polls and has charted new highs following each of them.

By Roshan Aslam

Recent years have seldom been more impactful for Bitcoin than 2024. As Donald Trump returns to the presidency and the Federal Reserve cuts interest rates by 25 bps within 48 hours, Bitcoin and the larger cryptocurrency ecosystem are witnessing a rapid upward movement. Furthermore, the Fed rate cuts were the second of its nature in as many months and came right after the Bank of England decided to cut the interest rates. All these developments are resulting in a chain reaction, acting as a catalyst for comprehensive value creation in cryptocurrencies, as has been seen with the back-to-back all-time high levels Bitcoin made since GOP and Donald Trump became US President-elect. 

At the time of writing this article, Bitcoin is trading at $88,457, up from the $68,317 level on November 6 — highlighting the favourable market sentiments associated with Trump’s return as President and the Fed rate cut. Crypto was one of the pressing matters during the campaigning phase ahead of the US presidential election, where Donald Trump managed to prove himself as a pro-crypto President. His remarks on making the US the crypto capital of the world, a mining powerhouse, reforming existing crypto legislation on crypto, and many others sat well with the Bitcoin and larger crypto investing community — an aspect that has since been reflected on the charts.

Role of Presidential Election

During its existence, Bitcoin has gone through three US Presidential polls and has charted new highs following each of them. What is more intriguing is the fact that BTC prices have not gone back to pre-poll levels after the US Presidential Elections. This steadfast momentum over the years has uniquely positioned Bitcoin as an adaptable asset to cater to long-term financial aspirations, an aspect that is expected to be highlighted once again. However, the Presidential election’s impact is far from limited to Trump’s campaign speeches, as new developments are on course to unfold.

Both the short and long-term impact of the Presidential election on Bitcoin is primarily expected to transform two aspects — regulations and market stability. As Donald Trump returns to the Oval Office, major changes in terms of policy and regulations are being expected from his administration, especially through strategic appointments to motivate adoption, institutional participation and favourable policies. A strategic appointment is expected at the US SEC (Securities and Exchange Commission), where the Chair Gary Gensler left his post vacant — whose reputation for regulatory stringency on the larger crypto sector was well known. Trump, during his campaign rallies, vowed to replace Gensler in the role, and the new Chair will be the focal point of POTUS’ new crypto regulatory approach. 

Furthermore, Donald Trump’s win in the election has largely been a favourable outcome for the crypto market that has infused a positive sentiment in the Bitcoin market. Currently, BTC’s market capitalization stands at 1.51 trillion, with historical data showing that the price action has doubled in the last two years, $18,550 in 2022 and $35640 in the year to date. Oscillators also indicate more upward momentum in the months ahead, with more buying pressure being infused in the market. 

Role of Rate Cuts

While US Presidential Elections were expected to have a long-term impact on Bitcoin, the subsequent interest rate cuts by the US Federal Reserve complete the puzzle to give it a comprehensively favourable outlook. The US Fed, chaired by Jerome Powell, announced a 25 bps rate cut on November 7 — the second time after October. Driven by the latest economic reports, this move by the US Fed is expected to bolster further upward momentum by Bitcoin, an enigma that was also witnessed in October. This is particularly important since October’s rate cut was the first of its nature in 4 years, and the emphasis on continuing this trend in a month further strengthens the resolve of crypto traders to participate in the market. 

This uptrend has also strengthened the Bitcoin ETFs, which have witnessed a record $1.3 billion inflow following the Trump win and Fed rate cuts. If this upward momentum on the back of cooling inflation and fed rate cuts is sustained, BTC may witness a potential move towards $90,000 in the short term and over $100,000 in the mid to long term. This notion is further supported by the MACD indicator that indicated a bullish crossover on November 7, however, the RSI indicated a quick correction to address the overbought zone.

The 25 bps rate cut by the Federal Reserve, coupled with the Bank of England’s interest rate cut provides a favourable outlook for investors. While Bitcoin’s unpredictability and volatility limit predicting its future, the contemporary belief is that economic policies like the rate cuts will have a more holistic impact than the Presidential Election, based on foundational principles that enable investors to borrow more in lower interests. However, it will take some time before the market is stabilised to understand the long-term impact of the rate cuts. 

What Does Crypto’s Future Look Like?

The larger cryptocurrency market, including Bitcoin, is adapting to the current changing world dynamics. As we move forward to the end of the year, favourable economic conditions and regulations may provide a beneficial outlook for Bitcoin and other VDAs. However, some volatility in the midst can be expected to bolster support zones and traders must be cautious regarding this periodical shift. Historical data suggests that when interest rates are reduced, both institutional and retail traders typically take more risks and a similar outcome has the potential to supplement Bitcoin’s growth. Any additional policy or regulatory reforms may add to this, however, traders must not contemplate potential changes but focus more on due diligence to make informed decisions. 

(The author is the Co-founder & CEO of GoSats)

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