Deribit’s latest Insights report looked at the possible impact of presidential election season on cryptocurrency and especially Bitcoin Options. A strong correlation between the aforementioned markets has often resulted in a period of notable volatility, with many incurring losses due to public policy changes, geopolitical developments, and even pandemics. With the 2020 U.S presidential election season surging to its conclusion, the impact of its results will be visible in stock market, but the same cannot be said for the cryptocurrency sphere.
Most crypto-statisticians believe that Bitcoin has started decoupling from the U.S. stock market index,or the S&P 500. Actually, Willy Woo had predicted that Bitcoin would break ties with the traditional market because of a boost in new entrants. Given the impact the correlation between stocks and Bitcoin has had on the cryptocurrency market, the decoupling can be a good sign.
The Bank of America believes that of the four potential election results, a “mixed presidency and senate” can be the most deflationary. In such a situation, each political party controls just one of the levers of policymaking. While Republicans stimulate the economy, Democrats are more likely to support consumers. Simply put, different outcomes will impact the stock market differently. How will the Bitcoin market be affected though?
The ability of cryptocurrency to exit a fiat denominated debt system will keep it away from a “fiat ticking time bomb.” The COVID-19 fiscal stimulus packaged in the U.S alone is worth about ~$2T, eight times the total Bitcoin market cap, a figure that hints at trying times ahead.
As researchers say, a mixed election will likely result in a policy gridlock, preventing much-needed government stimulus. This would create deflationary forces and hurt risk assets. The report added: “It will also likely curb polarized policy ambitions, leading to lower option implied volatility.”
What does this mean? Well, there could be a fall in the short-term Bitcoin price.
Meanwhile, a clean sweep, either way, might push Bitcoin and high-risk assets higher on the charts.
The Bitcoin market’s present-day situation seems to be quite volatile. The digital asset has been moving like a wave. Actually, on its whitepaper anniversary, the crypto-asset’s value managed to touch $14k, before the hourly candle closed at $13,813. At the time of writing, Bitcoin was trading at $13,693.
Such volatility will possibly continue until the end of the quarter, and investors will be advised to keep a close eye on the evolving trends in the stock market and the Bitcoin market.