- A contested election would plummet Bitcoin, but not for long.
- Continued rate cuts are bullish for risk-on assets like crypto.
The price of Bitcoin will soar even, indeed, especially, in the case of a contested US election in November.
That’s according to Adam Guren, chief investment officer of hedge fund Hunting Hill. He figures that while the uncertainty of such an event would initially roil capital markets, crypto included, it would also slow down the American economy.
Enough even for the Federal Reserve to ramp up more rate cuts. These days, that’s been synonymous with rising prices.
“If there’s an unknown around who the president might be, I’m sure we land in some recession, or at least a slowdown,” Guren, who helps manage $226 million at the New York-based hedge fund, told DL News. “In that version, you’ll have more rate cuts.”
Investors brace for impact
The US elections are top of mind for crypto investors.
Former President Donald Trump has embraced the industry, going as far as getting behind a soon-to-be-launched crypto project called World Liberty Financial. Vice President Kamala Harris has also warmed to crypto.
Regardless of who wins, said Guren, investors will finally have an answer to at least one question. That doesn’t mean markets are in the clear.
“There’s a middle-ground scenario,” he said. “We have an election, then it’s contested. I’m obviously hoping for nothing like that.”
Given Trump’s attempted coup following the 2020 election, he’s not alone in those concerns.
The CBOE volatility index, which measures the expected price swings in the S&P 500, is already starting to factor in potential post-election jitters, investment managers told Reuters. Similarly, the Nations TailDex, which measures the likelihood of acute and impactful so-called “tail risk” events, just hit a monthly high.
More rate cuts?
This also comes when the Fed is already engaged in an aggressive rate-cutting cycle.
Market watchers have increased the odds of a 25-basis-point cut in the November Fed meeting to 88%.
Anthony Scaramucci, former communications director for Trump and founder of investment firm SkyBridge Capital, predicts the Fed will cut rates by 75 basis points before the year’s out.
Cheaper dollars typically mean higher prices for cryptocurrencies.
“Rate-cut cycles have produced positive price movements in Bitcoin,” said Guren. Should they cut deep enough, it will supercharge the asset.
“If you were to get to negative real interest rates at some point, then that’s kind of where that really takes off.”
Liam is a Berlin-based correspondent for DL News. Got a tip? Email him at liam@dlnews.com