Bitcoin’s recent cooling comes as global markets brace for potential shifts tied to the rising chances of former U.S. President Donald Trump’s return to the White House. As Trump leads in prediction markets over Vice President Kamala Harris ahead of the November 5 election, financial conditions have tightened, casting a shadow over Bitcoin’s performance.
Bond yields and the U.S. dollar have surged in response to Trump’s growing momentum, as investors curb expectations for looser monetary policy. With Trump’s pro-growth agenda poised to impact an already strong U.S. economy, speculation is growing about the potential fallout for digital assets, particularly Bitcoin.
The cryptocurrency, which has rallied by about 60% this year, now faces its first weekly loss in three. On Thursday, Bitcoin inched up 1% to $67,127, narrowing its weekly decline to roughly 2%, but concerns remain about how Trump’s economic policies might temper the optimism he initially generated in the crypto space.
Tightening Financial Conditions Weigh on Bitcoin
“Absolutely, yes, the selloff in stocks, higher U.S. dollar, and higher yields all equal a tightening in financial conditions,” explained Tony Sycamore, a market analyst at IG Australia Pty. He noted that while financial conditions had initially been loose, the speed at which they are tightening is creating challenges for Bitcoin and other risk assets. “Not good for crypto at the pointy end of the spectrum,” he added.
The largest digital currency, which hit a record high of $73,798 in March, has been bolstered by demand for U.S. spot-Bitcoin exchange-traded funds. However, the recent market environment reflects growing uncertainty about how a potential Trump presidency could impact monetary policies and the broader economy.
Trump’s support for the digital asset industry during his campaign has been well-documented, lifting sentiment in the crypto community. He has repeatedly vowed to make the U.S. “the crypto capital of the planet,” a stance that contrasts with the regulatory crackdown seen under President Joe Biden’s administration.
The Impact of Trump’s Agenda on Crypto
As Trump battles for votes against Democratic candidate Kamala Harris, the two contenders have offered contrasting visions for the future of the crypto industry. Harris has taken a more cautious approach, committing to establishing a regulatory framework for the sector, while Trump’s pro-crypto stance could signal softer regulation if he wins the presidency.
The close nature of the race is evident, with a Bloomberg News/Morning Consult poll showing the candidates tied among likely voters in seven key swing states. This razor-thin margin means the final days of campaigning, including last-minute advertising and rallies, could prove decisive.
Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for digital-asset derivatives trading, believes that while Trump’s potential victory could lead to higher yields and negatively impact risk assets like Bitcoin, his expected regulatory softening toward the crypto industry should remain the more significant factor. “The expected regulatory softening of a Trump administration toward the crypto industry should still be the more important factor,” she said.
Conclusion: Uncertainty Looms for Bitcoin as Election Nears
As the U.S. election draws closer, Bitcoin’s fate may hinge on the broader financial environment shaped by the next president. While Trump’s pro-crypto rhetoric has bolstered optimism in the sector, the tightening of financial conditions could present challenges. For now, Bitcoin remains volatile, caught between the forces of rising bond yields, a stronger U.S. dollar, and the unpredictable nature of global politics.