Summary Bitcoin's performance is influenced by political outcomes; a Trump win is seen as more bullish due to his pro-crypto stance and policies. A Harris administration is expected to maintain the current crypto environment. While less bullish, it shouldn't hinder Bitcoin's growth. Long-term holders should ignore election volatility, while potential buyers might wait for a less risky entry point after the election results. Bitcoin ( IBIT ) had a good run in October but stopped just short of breaking to a new all-time high above the March peak. Political uncertainty capped the rally as polls tightened ahead of election day. This article looks at how IBIT could react to a Republican or a Democrat win and possible approaches to the volatility. A Bitcoin Superpower I don't want to get too political in this piece. Bitcoin has been around for a long time and flourished under both parties. It is very likely to continue higher no matter who wins the election, but the outcome could influence the immediate response and the size of any rally. It is quite clear a Trump administration is seen as a positive for Bitcoin. This is evident in the price action - it rose to a 7-month high in October as Trump rose in the polls and took a slight lead. When the polls tightened again in late October, Bitcoin reversed from stiff resistance at the March all-time high and fell back -9%. Trump v Harris Polls (RealClearPolling) A Trump victory is viewed as a positive for a variety of reasons. His campaign has accepted cryptocurrency donations and Trump has made multiple comments in support of Bitcoin and crypto. During a Bitcoin conference in Nashville, Trump vowed to make the US the “crypto capital of the planet and the Bitcoin superpower of the world.” He also added that his government would hold on to "100% of all the Bitcoin” in their possession. Trump's close associates are also supportive of cryptocurrency. Vice presidential candidate JD Vance, "a major supporter of digital currencies, also owns between $250,000 to $500,000 in bitcoin, his disclosure form shows." Then there is former presidential candidate and now close ally, Robert F. Kennedy Jr. In recent rallies, Trump said, “I’m going to let him go wild on the food. I’m going to let him go wild on the medicines.” Will he let him go wild with other policies? When Kennedy was in the running for president, he promised to create a Bitcoin reserve. I intend as president of the United States to sign an executive order on day 1, directing the Department of Justice and the US Marshalls to transfer approximately 200,000 Bitcoin held by the US government to the US Treasury to be held as a strategic asset. He then planned to sign another executive order to direct the Treasury Department to buy 550 Bitcoin daily to amass a reserve of 4 million Bitcoin. At the current price of $69k, that would be worth around $270T and take up around one-fifth of the total Bitcoin supply. It sounds improbable, but Kennedy clearly has Trump's ear on a number of topics, and creating a strategic reserve of Bitcoin is something they may pursue. Elon Musk's support of Trump and support of cryptocurrency is well known. Both Tesla ( TSLA ) and SpaceX hold sizeable Bitcoin wallets. Moreover, Elon may be involved in providing financial advice in the new administration and there has been talk he will be involved in the formation of DOGE (Department Of Government Efficiency). This name is obviously a play on the cryptocurrency Dogecoin. Elon recently met with Howard Lutnick, the Wall Street CEO heading Donald Trump's transition team to discuss the formation of DOGE. Lutnick is perhaps the most avid of all crypto supporters in Trump's inner circle. This is what he said to YouTuber Anthony Pompliano. I have hundreds of millions of dollars of exposure to bitcoin and it will be billions...Bitcoin, which is rare and is special, will become ever more rare, ever more valuable, over time it'll be financed just like gold [and] oil. Bitcoin will be way, way, way higher—sometimes lower—you just have to have faith. To conclude, Trump himself has turned from a Bitcoin critic to a supporter and has surrounded himself with people heavily invested in cryptocurrency. There has been talk of the formation of a Bitcoin strategic reserve, and mining operations. Whether any of this unfolds or not, clearly a Trump administration will be very supportive of cryptocurrency and it has been reflected in the moves in Bitcoin in the last month or so. The Harris Angle Should Kamala Harris win, the cryptocurrency environment would likely stay the same as it is now. There has been talk of regulation, but these are likely targeted at scams and increasing safety should not weigh on Bitcoin prices at all. Harris has said she will “encourage innovative technologies like AI and digital assets.” Indeed, since Democrats won the last election in 2020, Bitcoin has rallied around +385% and huge strides have been made with the launch of crypto ETFs. There is nothing to suggest Bitcoin will stop rallying under a Harris administration. That said, the initial reaction to a Harris win is likely lower as it is the less bullish option. The slight rise in Harris's polls and the drop in Bitcoin in the last week is a reflection of this. Trading the Election IBIT is a Bitcoin ETF that makes it easier to buy and sell Bitcoin in a broker account alongside stocks and other funds. The expense ratio of 0.12% means there is not such a large price to pay for this convenience. IBIT has excellent liquidity which lessens the risk of trading volatile events like the election. One approach to the election is to simply hold IBIT and ignore the volatility. Bitcoin has made a bullish formation on the chart - a cup and handle - and is in a long-term uptrend. Who wins the election isn't likely to change the trend. Bitcoin Daily Chart (Tradingview) If you are a potential buyer, there is a dilemma. Buy now and risk a drop on a Kamala win, or buy later and miss the rally on a Trump win? I can't answer that for you but I do think it is a good idea to have some cash at hand. You may have to buy 20% higher, but a good entry may set up if Bitcoin breaks to a new high and consolidates. On the other hand, you may get an opportunity to buy 20% lower near $50k. Either way, you shouldn't be looking at a large loss by the end of the week. Risks Bitcoin is volatile and the slow consolidation over most of 2024 has lulled many into a false sense of security. It dropped -77% in a year from the 2021 high, mostly in correlation to other risk assets and due to the Fed's tightening cycle. The next drop may not be related to the election at all. The main risk I see is if Bitcoin is used as a source of liquidity for other failing trades. For example, if the USDJPY carry trade were to blow up, Bitcoin could be sold to cover margin calls and re-pay debt. While Bitcoin has a long-term uptrend, short-term swings can be significant and investors shouldn't be complacent with dreams of $100k. Conclusions Bitcoin is in the political spotlight and there is optimism that Trump policies will support a large rally. On the other hand, there are recent concerns that a Harris win will lead to a drop in Bitcoin. This is not due to the threat of regulations or anti-crypto policies, but simply because it is seen as the less bullish option. A drop is likely to be recovered into 2025. There are various ways to approach the election. Long-term holders of IBIT will likely just continue to hold as politics are not likely to change the long-term trend. Those looking to buy may choose to wait until a less risky buying opportunity, even if that happens to be higher once IBIT has broken to new all-time highs.
