Normally, the world knows who the next President of the United States will be on a Wednesday—the morning after election day. But with the coronavirus pandemic prompting millions of Americans to vote by mail instead, it seemed inevitable that there would be an agonizing wait until the results became clear.
And so, after four days of speculation (and CNN valiantly trying to fill airtime by zooming into counties on a Magic Wall), an outcome finally emerged on Saturday: Joseph R. Biden, Jr. will be the 46th commander in chief.
Bitcoin’s price performance over the past week has been curious to say the least. From Nov. 3-6, the world’s biggest cryptocurrency surged by 15% and hit highs of $15,903—levels that haven’t been seen since January 2018.
But look what happened when major media outlets declared Biden was the winner, at about 11.30am ET. In the space of just three-and-a-half hours, BTC tumbled by 6.5 per cent, hitting lows of $14,521, before speedily rebounding again. All of this helps to reinforce the narrative that Bitcoin thrives when there is uncertainty.
The question now is where Biden’s presumed ascension to the Oval Office leaves Bitcoin. Will the Democratic president-elect adopt a less hostile attitude toward digital assets than Donald Trump, who publicly declared that he was “not a fan” of cryptocurrencies? And will his new administration pursue a central bank digital currency (CBDC) with greater urgency than the U.S. Treasury under Steven Mnuchin, who said a digital dollar wasn’t needed until 2025?
Biden and Bitcoin
To begin with, it’s worth noting that the 77-year-old, who will turn 78 this month, hasn’t yet adopted a public position concerning Bitcoin and other digital assets.
That said, it’s difficult to imagine that Biden is too excited about cryptocurrencies. Back in July, the president-elect’s Twitter account was among those targeted in a high-profile hack. Messages sent to his millions of followers said: “All Bitcoin sent to the address below will be sent back doubled! If you send $1,000, I will send back $2,000.”
Those tweets were swiftly deleted—and in one of his only remarks about cryptocurrencies, he later wrote: “I don’t have Bitcoin, and I’ll never ask you to send me any.” (He went on to turn the incident into a campaigning opportunity, inviting contributions “to help make Donald Trump a one-term president.”)
Instead of fixating on how Biden feels about Bitcoin, several crypto experts say the industry needs to look at the bigger picture.
Jake Chervinsky, Compound Finance’s general counsel, tweeted: “President-elect Biden hasn’t said anything publicly about his views on crypto. For now, it really isn’t a big enough issue to warrant his attention. The next four years of US crypto policy depends on who he appoints to key positions; we’ll know more as the transition gets going.”
Frontrunners for top positions
Biden is wasting no time in bringing together his top team. One of his top priorities is building a 12-member taskforce focused on the coronavirus pandemic.
Beyond this, we’re starting to hear murmurings about those being considered for plum posts. According to The Economist, Lael Brainard, an official at the Federal Reserve, is the frontrunner to succeed Mnuchin as Treasury Secretary. This would be significant because of how she has played an instrumental role in researching how a digital dollar would work.
Meanwhile, The Guardian has said Andrew Yang, whose time as a Democratic presidential candidate drew to a close in February, is “reportedly high on Joe Biden’s list of potential cabinet appointees.” Again, this would be a big deal for the digital assets sector. Modern Consensus has previously characterized Yang as “crypto’s favorite son” given how his campaign was the first to incorporate formal policies on cryptocurrencies and blockchain. Yang has repeatedly called for “clear guidelines as to how cryptocurrencies/digital asset markets will be treated and regulated.”
The Wall Street Journal has also claimed that Gary Gensler, the former head of the Commodity Futures Trading Commission (CFTC), is set to serve as a financial advisor—tasked with developing tough new plans to oversee investment banks and the markets. This is significant because of how Gensler has taught lessons at MIT about how Bitcoin and blockchain could transform finance. Last December, in an op-ed for CoinDesk, he also wrote: “The potential for this technology to be a catalyst for change is real … Cryptocurrencies and blockchain technology have already prompted real change and can continue to do so.”
During the campaign, Biden stated that he was determined to allow Americans underserved by the financial sector to gain greater access to banking services and lending products. It’s highly likely that people like Brainard, Yang, and Gensler would encourage the president-elect to explore digital assets as potential solutions.
It’s also worth looking at those who were major financial contributors to the successful election campaign. Sam Bankman-Fried, the CEO of cryptocurrency derivatives exchange FTX, reportedly gave $5.2 million to Biden—second only to Mike Bloomberg when it comes to the size of his pledge. Could this contribute to a gentler stance on crypto going forward?
What’s next for Bitcoin?
As you’d expect, there’s now a lot of speculation about the short-term impact that Biden’s victory will have on Bitcoin prices.
We’ve seen a trend where BTC tends to spike when things go wrong. Because of this, it’s worth keeping an eye on Donald Trump’s attempts to contest the result. He’s claimed that the election was “stolen” as a result of fraudulent votes that were cast in Biden’s favor—but so far, he hasn’t provided any evidence to back this up. Extensive recounts and legal challenges could end up spooking the markets, and prompt renewed interest in Bitcoin.
Last but not least, keep an eye on Washington’s progress in agreeing on a new economic stimulus package. Lawmakers have been gridlocked for several weeks on this issue, and it’s fair to say that it was put on the backburner during the election. The Fed has warned that an urgent cash injection is needed to prevent the economy suffering further damage.
The stock market would likely surge as soon as a deal is made, and this could also help Bitcoin surge. Any stimulus package would inevitably involve printing more money, devaluing the dollars already in circulation—making BTC, which has a fixed supply of 21 million, more appealing. Linking to a video of remarks from Fed chair Jerome Powell, in which he said the economy will need further support, Gemini co-founder Tyler Winklevoss tweeted: “This is code to buy #Bitcoin.”