Cryptocurrencies are extremely volatile, and this election could have an impact on them for the next four years.
The world’s largest cryptocurrency, Bitcoin (BTC -0.53%), has been on a great run this year. During the last month, Bitcoin has climbed 14%, mainly due to the expectation that Donald Trump will triumph on Election Day. However, the market may also be starting to contemplate a Republican sweep in Congress as well. Polling suggests the Republicans are favored to take the U.S. Senate, while the U.S. House of Representatives is considered a toss-up. Everything is close, and polling and the betting markets have been wrong in past elections, so anything can happen. But if the Republicans manage to sweep Congress, Bitcoin could soar by 75% in the final two months of the year, according to one Wall Street analyst. Here’s why.
Republicans may pass more friendly crypto regulation
Many experts believe Trump and the Republicans would pass better laws and regulations for crypto if elected. Based on options pricing, Standard Chartered analyst Geoff Kendrick, in a recent research note, said Bitcoin could rise more than 4% immediately after a hypothetical Trump victory and an additional 6% in the following days. A Republican sweep of Congress could send the price of Bitcoin to $125,000, implying at least 75% upside from Bitcoin’s price of about $70,000 as of Nov. 1.
Kendrick sees three potential major catalysts for Bitcoin in the remainder of 2024 and 2025. The first is the removal of an Securities and Exchange Commission memo known as SAB-121. This required banks to report crypto assets held in custody as on-balance sheet liabilities held at fair value. Custodial assets are normally treated as off-balance-sheet assets. Holding crypto assets in custody on balance sheets leads to higher capital and liquidity requirements, which the bank regulatory agencies dictate and govern. This has prevented the banking system from offering crypto custodial services at scale, according to the American Bankers Association.
The other catalysts include more flows into Bitcoin exchange-traded funds (ETFs) and a likely increase in inflation, which experts expect to occur under both presidential candidates. Many investors view Bitcoin as a hedge against inflation. Trump would also push for the resignation or removal of Gary Gensler as head of the SEC. Gensler has taken a stricter regulatory approach to Bitcoin.
Kendrick does not see a Kamala Harris victory as necessarily bad for Bitcoin. Under this scenario, Kendrick thinks there will be an initial dip for Bitcoin, which will ultimately end the year around $75,000. Several reports have indicated that Harris may also push for the removal of Gensler, and Kendrick thinks a Harris administration could also remove SAB-121 eventually.
Will Bitcoin hit new all-time highs?
Setting share price targets is no easy task, even for the most stable blue chip stocks. It’s even more challenging with a volatile asset like Bitcoin. However, I think Kendrick is presenting some good analysis here.
Investors increasingly see Bitcoin as a form of digital gold. With Trump and Harris planning to try to pass inflationary policies, Bitcoin should benefit. Regardless of who wins, there’s a good chance Gensler will be removed from office, and SAB-121 will be eliminated, although a Republican sweep would likely expedite these measures. So, I expect to see new highs for Bitcoin later in the year and next year, but a Trump win and Republican sweep in Congress is probably more bullish for the world’s largest cryptocurrency.
Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.