- Bitcoin leapt 17% this week to cross the $15,000 mark, nearing a 3-year-high.
- The digital token’s latest surge came as Joe Biden’s election lead edged up higher. He is projected to defeat incumbent President Donald Trump in the 2020 election.
- A divided Congress would be great for Bitcoin because the dollar can expect a substantial decline under a gridlocked government, Bill Noble, chief technical analyst at Token Metrics, told Business Insider.
- That’s because the Federal Reserve would be forced to print more money to support the economy, which depresses the value of the dollar and lowers US borrowing costs.
- That would, in theory, fuel inflation, forcing investors to seek alternative safe-haven investments, he said.
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Bitcoin soared past $15,500 this week, hitting its highest level since January 2018, fueled by a cocktail of a weak dollar and acute uncertainty over the US political and economic outlook.
The rally coincided with Democratic nominee Joe Biden steadily gaining the lead in critical battleground states in the 2020 presidential election. He is projected to defeat Trump in the 2020 election.
Bitcoin has risen 17% in the past week, hitting $15,527 as of 09:00 am ET on Friday. The price has gained almost 60% since the end of August and is up nearly 300% so far this year.
Why is its price soaring?
Biden in the White House and a Republican Senate is great for cryptocurrencies, because his presidency would probably drive the dollar lower, according to Bill Noble, a chief technical analyst at Token Metrics.
Projections of a declining dollar suggest that investors are looking to alternative investments – and that is fueling demand for Bitcoin and other cryptocurrencies, he said. It has also pumped up the likes of gold, silver and other hard commodities, although not by nearly as much.
If it is harder for the Democrats to push larger stimulus bills for households and businesses past a majority of Republican lawmakers in the Senate, it could fall to the Federal Reserve to take more action to support the economy, which would depress the value of the dollar and keep interest rates low – making it cheaper for anyone looking to borrow money that they want to invest.
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Why would the Fed print more money?
Gridlock in Washington could force Federal Reserve Chairman Jerome Powell to aggressively print and inject more money into the financial system, Noble said. That’s because if politicians can’t help the people, the Fed would have to take matters into its own hands.
“That’s going to fuel both the dollar going lower and it’ll fuel inflation,” he said.
The cheaper the dollar becomes, the more Americans have to pay for imported goods and the less their currency is worth, which is one of the key drivers of inflation.
“The way the US election played out, it’s going to result in even more money printing than what’s happening now,” Noble said.
Why is Bitcoin a safe-haven right now?
Another reason Bitcoin’s price is spiraling higher is because big corporations, like PayPal, Microstrategy, and Square have decided it’s a must-have for their balance sheets. “You’re not going to be able to go to a holiday party as a CFO if you don’t have Bitcoin,” Noble said.
Noble, who believes the digital token will be necessary to help people pay bills, said the rally is going to spill over, not just into other cryptocurrencies, but other asset classes too. “Bitcoin will be the tide that lifts all boats. That could include stocks,” he said. Rival coins such as Ethereum and Ripple have gained sharply too.
He said there’s no other currency that’s as good at diversifying cash holdings and acting as a safe haven. “Is the pound or the euro going far enough in an inflationary crisis environment? Answer is no – it’s not.”
Famed investor Mike Novogratz also believes the prospect of a mostly conservative Senate and the end of President Trump’s “chaos” will benefit both Bitcoin and stocks. He expects every central bank to be issuing a digital currency within the next five years.