The impact of the US election on the cryptocurrency market is a complex and multi-dimensional topic. It not only involves traditional financial fields such as macroeconomics, policy orientation and international relations, but also directly relates to the development trend of cryptocurrency, an emerging asset class. However, judging from the current situation, it seems that Trump will be in power without any suspense. The following will discuss in detail how the US election affects the cryptocurrency market through different channels:
1. Fiscal policy
- Tax cuts and fiscal deficits: Trump introduced massive tax cuts during his first term, which increased the government's fiscal deficit. If re-elected, he may further push for tax cuts, especially for corporations and the wealthy, which could increase the fiscal deficit and affect the long-term value of the dollar[^5^]. - Government deficits and debt levels: The U.S. government's fiscal deficits and high debt levels could affect global confidence in its currency. As shown in the Grayscale report, if the election results tend to increase the government deficit, this could have a negative impact on the dollar, thereby increasing the demand for Bitcoin as a means of "store of value"[^1^].
- Twin deficit problem: The fiscal deficit and trade deficit faced by the United States may expand simultaneously, causing international investors to reduce their investment in U.S. Treasury bonds and turn to alternative assets such as Bitcoin[^1^].
- International debt environment: The United States’ huge international debt may cause overseas investors to seek other alternatives for storing value, such as Bitcoin[^1^].
- Government spending: Trump is inclined to increase spending in the defense and security sectors, which will further increase public debt. High fiscal deficits and high debt levels can have a negative impact on the currency market because they generally undermine investor confidence in the currency.
2. International trade policy
- Trade war: Trump is known for his protectionist policies. After taking office, he may impose higher tariffs on trading partners such as China, similar to the Sino-US trade war he launched in 2018. Such policies will cause uncertainty in the international market and may cause investors to turn to safe-haven assets such as Bitcoin[^3^][^4^].
- International economic relations: Trump’s policy of isolation may weaken the US’s economic influence in the world, which will have a negative impact on the international status of the US dollar, and thus may enhance the attractiveness of Bitcoin as a decentralized asset[^1^]. The US’s geopolitical role in the world directly affects the international status of the US dollar. If the US’s international influence weakens after the US election, this may prompt other countries to reduce their dependence on the US dollar and turn to decentralized assets such as Bitcoin[^1^].
3. Regulatory environment
- Cryptocurrency regulation: The Trump administration has had a vague regulatory stance on cryptocurrencies in the past, lacking clear regulations. If Trump is re-elected and continues this regulatory stance, the cryptocurrency market may continue to face uncertainty, which could be a negative or positive, depending on the specific policy content and how it is implemented [^2^].
- Independence of the Federal Reserve: Trump may erode the independence of the Federal Reserve, forcing it to implement a looser monetary policy, which could lead to long-term inflation and increase demand for Bitcoin as an anti-inflation tool[^5^].
4. Technological innovation
- Support for blockchain technology: The Trump administration generally supports traditional industries in terms of technological innovation, and has less support for emerging technologies, especially cryptocurrencies. Lack of government support may limit the development of blockchain and cryptocurrency technology in the United States, which is a negative factor for the currency market [^2^].
- Possibility of a digital dollar: If Trump is elected, his government is less likely to actively promote digital currency, which may slow down the progress of the digital dollar. In contrast, other countries such as China may make greater progress in the field of digital currency, which will affect the status of the US dollar and Bitcoin[^3^].
5. Market reaction
- Stock and bond markets: Trump’s policies could increase volatility in the stock and bond markets, which could lead investors to seek more stable investment options, such as digital currencies like Bitcoin: Surveys show that many voters believe inflation is one of the most pressing issues in the United States [^1^]. Bitcoin is seen as an anti-inflation tool, so it may be favored in an environment of expected inflation.
- Geopolitical risks: Trump’s unpredictability and his tough foreign policy could exacerbate geopolitical risks, which typically increases demand for safe-haven assets such as Bitcoin[^1^].
In summary, if Trump is elected President of the United States in 2024 (which is a sure thing!), his policies may have a complex and multifaceted impact on the cryptocurrency market. From international trade policy, fiscal policy to the uncertainty of the regulatory environment, all may have a direct or indirect impact on the cryptocurrency market. Although Trump's re-election may bring some positive factors, such as increasing demand for Bitcoin to fight inflation, its potential negative effects cannot be ignored, such as escalating international trade tensions, widening fiscal deficits, and uncertain regulatory environment. Therefore, investors should pay close attention to the election dynamics and evaluate various possible risks and opportunities.