Cryptocurrencies

What strategy to adopt for the US election? – Cryptocurrencies

BTC / USD remains undecided but firmly above $ 10,000. In the medium term, all markets are suspended on the outcome of the US presidential election which will take place in early November. Election, inflation, reconfinement, recession … Electricity is in the air and it is time to ask what the impact of macroeconomic uncertainty should be on Bitcoin.

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Short-termists vs long-termists

There are two schools. We have on one side the empirical. They can see that the value of Bitcoin is extremely volatile. Even though this volatility has subsided a bit in recent years, BTC / USD has still slipped from 50% between February 14 and March 12. Including an 40% flash crash in one day, March 12. This volatility is due in large part to the inconsistent distribution of Bitcoin and the lack of depth in the market. These youthful weaknesses make it a very risky when it is the stampede at Wall Street.

Bitcoin fell during the March stock market crash
BTC vs S & P500

The empiricists will tend to sell Bitcoin when fear takes hold of the markets and the stock market falls.

On the other side are the rational. The latter assume that Bitcoin is a safe investment. That is, like gold, it should be an asset to flock to in the event of a mayhem (war, bubble burst, recession, inflationary shock, etc.).

Rationalists don’t care about short-term correlations. They buy Bitcoin when the stock market falters, well aware that the Bitcoin is precisely a protection against the bursting of the ponzi and the printing of money.

VIX, for the sake of risk

Historically, BTC / USD is inversely correlated to the VIX. BTC therefore tends to fall when the VIX goes up (when fear sets in the markets). This is quite true in recent weeks with BTC moving in tandem with the US stock market. However, Bitcoin also has a increasingly strong correlation with gold, his physical alter ego.

VIX
The VIX “the fear index ”
Historically (10 years), BTC / USD tends to fall when the VIX rises above 30.
The Volatility Index (VIX) is a real-time market index that tracks the 30-day implied volatility of a basket of options on the S&P 500 Index.

Now that we have said that, we must add that gold clearly has an inverse correlation with the VIX. Gold is the ultimate thousand-year-old safe haven. For example, he appreciated 150% in the wake of the 2008 crisis.

The question is therefore whether Bitcoin will follow gold or the S & P500 (US stock market) in the event of very strong shakes. ? The outcome will be very interesting to follow in case of mayhem. For example, if the US election ends in blood sausage amid accusations of fraud … Supreme Court America will then have to decide what to do next and uncertainty will most likely be conducive to a fall in the markets.

Election fraud

It turns out that with the Coronavirus epidemic and all the hysteria orchestrated by the media, American authorities have decided to encourage the vote by mail to prevent the virus from spreading through the queues. ” Mail-in voting ” in English.

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The problem with Mail-In voting is that many votes were declared void in previous elections. 550,000 votes were not counted in the Democratic primaries of 2020. Is 1.5% of the 37 million votes. It’s much more than in the presidential election of 2016 with 128 million votes for “only” 318,728 invalid votes. Is 0.24% votes by mail invalidated.

What will the number be for the November election? 5%? Enough to tip the election one way or the other … For example, in 2016, Trump won the state of Wisconsin by a margin of 23,000 votes when more email votes were declared void.

mail-in voting trump

The American voting system is such that a few states (“swing states“) Can completely tip the balance of the election… In Texas (a swing state), authorities discovered that criminals “garnered votes” by paying people willing to sell their votes. Yes, you can vote up to one month before the official election date in the United States …

Let us recall in passing that we now know that George W. Bush should not have won the 2000 election … The Supreme Court then declared him the winner of the key state of Florida by 537 votes in advance …

Bitcoin and crystal ball

There are several scenarios

  • Donald Trump is elected with such a comfortable lead that the Democrats recognize their defeat without complaining. The stock market should then salute the election because the US president has done everything so far to raise the stock market. Rise of Bitcoin.
Trump tweet stock market
“The stock market hits a new high, with the longest streak of gains in decades. A high level of confidence and optimism – even before the deployment of the tax plan. ”
  • Joe Biden is elected with a comfortable lead. The stock market could rock because the Democratic program foresees a net increase in the taxation of multinationals. Slight drop in Bitcoin.
  • The results are tight. Trump announces victory before count ends, Joe Biden refuses to concede defeat. The uncertainty and the moment of hesitation could cause bad weather on Wall Street. Decline in Bitcoin.

That being said, Bitcoin could rise if the election turns into civil war. The imperial currency could then dive into the forex and do the Bitcoin business.

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Whatever happens, the Fed is watching over the grain will print new trillions to keep the house going. Which is obviously bullish for BTC.

QE vs BTC monetary base
Bitcoin Monetary Issue (White) vs Fed Balance Sheet (Orange)
Bitcoin is structurally deflationary as fiat currency is stuck in inflationary headlong rush

A stock market crash that pulls BTC down will give us a bargain buying opportunity while we wait for the empire to break down …

  • Weekly BTC / USD chart (one candle = one week)
BTC USD
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