Political elections are always full of variables, and any "surprise" could lead to violent market fluctuations. Investors need to prepare for various possible scenarios.
The 2024 U.S. election is about to welcome the "final battle." Who will take over the White House? Is it the historic first female president Harris, or the returning Trump? The arrow is on the string, and the result is uncertain.
It is worth noting that cryptocurrencies have quietly become the "new battlefield" in this election. Trump's comments frequently affect Bitcoin price fluctuations, while Musk, who has deep ties to Dogecoin, also supports Trump's campaign. The Bitcoin and virtual asset market seems to be bound to this "political-business alliance." Currently, Bitcoin's price fluctuates around $70,000, and can Trump's election prospects become the "starting gun" for Bitcoin to break through?
Currently, the market has begun to bet on Trump's victory in advance, and this expectation has manifested in multiple areas. The U.S. stock market, U.S. Treasury market, precious metals, and cryptocurrency markets all show distinct characteristics of a "Trump rally." Over the past month, Bitcoin's price movements have shown a high degree of synchronization with Trump's election odds. The direction of the election in the seven key swing states will become a key factor in influencing the market.
From Wall Street to Silicon Valley, from traditional finance to digital currencies, traders are deploying their investment strategies based on this expectation. However, political elections are always full of variables, and any "surprise" could lead to violent market fluctuations. Investors need to prepare for various possible scenarios.
If Trump wins, the traditional financial market may have the following impacts:
On monetary policy: It is expected that Trump will maintain a relatively loose monetary environment. This policy orientation will favor risk assets such as U.S. stocks, especially benefiting the industrial and traditional energy sectors; meanwhile, U.S. Treasury yields are expected to trend upward.
On tax policy: The Trump administration plans to lower domestic corporate tax rates while increasing tariffs on foreign goods. This industrial policy inclination will benefit prices of energy commodities like copper and oil; it will also favor the development of technology companies.
On international relations: Trump has promised to end the Russia-Ukraine war within days of taking office, but has stated he will continue to invest in the Middle East. These adjustments in foreign policy may affect the performance of defense stocks but will generally provide a more stable environment for the market.
If Trump wins, the digital currency market will have the following impacts:
Bitcoin is expected to lead the breakthrough: As Bitcoin has been deeply tied to Trump's image, combined with Trump's previous statements supporting Bitcoin, such as promising to incorporate it into the national reserves and replacing the current SEC chairman Gary Gensler, these proposals are expected to be gradually realized after he takes office. Considering that Trump is known for "keeping campaign promises," Bitcoin is likely to lead the way in breaking through new highs.
Dogecoin may face opportunities: Trump's political and business ally Musk has always had deep ties to Dogecoin, and it is expected that he will take advantage of Trump's victory to help Dogecoin (DOGE) regain market attention.
WLF may drive the DeFi ecosystem: The WLF (World Liberty Financial) supported by the Trump family is likely to become a new market focus due to this opportunity. This will not only bring rising opportunities for WLF but is also expected to boost the entire DeFi ecosystem, thereby driving up the price of Ethereum (ETH).
Although Trump currently has a higher probability of winning, the occurrence of "special" events during the election process cannot be ignored. According to the latest data from PolyMarket, Trump's approval rating is 56.2%, down from last week's peak of 65%. The election situation remains tense, and if Harris ultimately wins, market expectations will be shattered, leading to a significant reversal.
If Harris wins, the traditional financial market may have the following impacts:
On tax policy: Harris advocates raising taxes on the wealthy and large corporations and plans to increase the corporate tax rate from 21% to 35%, as well as raising funds for the treasury through taxes on financial transactions. These policies may impact the overall profitability of companies but will benefit areas that profit from fiscal measures.
On fiscal spending: Supporting a universal healthcare plan, expanding social welfare spending, and promoting the development of the "care economy" will drive sectors related to healthcare and social services. At the same time, a $10 trillion climate plan is proposed, which will significantly benefit the new energy industry.
Overall market direction: Once market expectations are shattered, the stock market may experience significant fluctuations. Before the new government's policies become clearer and investors readjust expectations, the market will need time to find a new direction.
If Harris wins, the digital currency market will have the following impacts:
On regulatory trends: The Harris administration may continue the Biden administration's strong regulatory approach. The SEC's regulatory policies are likely to maintain a tough stance, and overall law enforcement intensity is expected not to weaken, which will affect the institutionalization process of cryptocurrencies.
Market direction: Since the current market has already priced in Trump's victory, if expectations fall short, Bitcoin may face a significant correction. According to Bernstein's predictions, it may drop by 10% by the end of the year. The market needs to establish new valuation logic.
Delay in institutional entry: Harris's attitude towards cryptocurrencies is relatively ambiguous. Although she has expressed support for the development of digital assets to maintain U.S. competitiveness, she lacks specific policy details. This uncertainty may affect investor confidence and delay the pace of institutional entry.
Once Trump successfully becomes president and smoothly takes over the White House, how will the crypto market develop in 2025?
Positive news, favorable policies for the digital currency market will gradually be implemented, including incorporating cryptocurrencies into reserve assets, restructuring the SEC management framework, and formulating comprehensive regulatory policies. The gradual realization of these positive factors will drive the market to continue rising until reaching a temporary peak.
Negative news, as the effects of short-term financial stimulus policies gradually weaken, the U.S. economy may fall into a recession and stagflation dilemma. In this case, market funds will chase the asset class with the greatest increase, strongest liquidity, and lowest actual application value—Bitcoin.
Negative news, if there are other black swan events during Trump's presidency or in the U.S., the digital currency market may experience a cliff-like decline. Overly binding Bitcoin's development prospects to a specific individual is risky; while short-term benefits may arise, experiencing pain when breaking free from such influence is inevitable.
The U.S. election battle is intense, and every statement from the two candidates affects the market's nerves. Regardless of the outcome, investors need to remain clear-headed, pay attention to the progress of policy implementation and changes in market expectations, and manage risks while seizing opportunities, avoiding excessive influence from short-term market emotions.
