With less than 30 days left until the race for the White House, markets appear to be dealing with an increasing level of political uncertainties. The impending election is coming as a conclusion to a chaotic year featuring business shutdowns and monetary inconveniences, amid fighting against the infamous global pandemic surprise, COVID-19. Several tweets from the incumbent president relating to the election, have been seen to impact greatly on the stock markets as well as Bitcoin and other crypto assets.
Political uncertainty at every point has been a function burdening the market and keeping traders anxious as they strived to analyze the possible outcome. On his part, President Donald Trump has increasingly claimed in many of his tweets that his opponent, Joe Biden would crash markets and tax the country into depression should he win.
Through the course of the month, various events, announcements, and actions have impacted significantly on the price action of the crypto markets. First, Trump’s diagnosis of the coronavirus and afterward, his announcement to end stimulus negotiations.
The President’s COVID-19 diagnosis further heightened the uncertainty already associated with the election. Following immediately after the announcement, U.S stocks fell along with Bitcoin and Other cryptocurrencies.
Crypto markets reaction alongside Trump’s COVID-19 recovery
On the second day of October, President Trump confirmed via Twitter that he had contracted COVID-19, along with the First Lady, Melania. He announced that they would both immediately begin with quarantine and in a more optimistic tone, noted that they would definitely get through the illness.
Both stock and crypto markets showed an immediate reaction towards this announcement. The S&P 500 and the Dow Industrial Average both experienced a notable loss as the markets opened low following the announcement. Bitcoin, which seems to be moving in tandem with the stock markets, led the losses with a record of 4% loss in 24 hours after the announcement. As usual, other altcoin markets followed Bitcoin’s lead and acted accordingly. The overall market capitalization for the crypto markets dropped by 3.6%. ETH experienced a 4.8% plummet in price, while Chainlink recorded a 7.5% loss also in a span of 24 hours. Gold, on the other hand, traded higher upon the announcement of Trump’s diagnosis.
After the immediate slight drop, price movements remained quite steady. However, the market started showing an inverse reaction from the initial losses and began to react positively following Trump’s announcement of a likely discharge. The declaration led to a major spike in the price of Bitcoin.
Trump shocks financial markets by ordering a halt to stimulus negotiations
For months now, negotiations for a second COVID-19 stimulus package for United States citizens have been ongoing. However, President Donald Trump surprised the markets by unexpectedly announcing via his Twitter page his plans of postponing the stimulus talks until after the 2020 presidential election.
“Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
Trump ordered a halt to negotiations till after the election on November 3rd. He added that Pelosi was “not negotiating in good faith”.
The market seemed to have met this announcement with clear disapproval as the price of BTC dropped in sync with the visible fall experienced in stock markets shortly after the declaration, Ethereum, and other major altcoins also suffered a plummet in price. The price drop in bitcoin along with other mainstream markets, is a clear indication to support the view that bitcoin continues to correlate with traditional markets as its price action appears to react in tandem with them.
It is commonly acknowledged that the performance of the stock market is majorly reliant on Trump’s position. This implies that if Trump should lose the election, the stock market will fall into a chasm. The American stock market likes Donald Trump because he cuts taxes for the stock market. So if he wins, the US Dollar will rise along with the stock markets.
However, the stock markets continue to rise even though it is believed that Biden might win. The possibility of Biden winning the election gives more prospects towards the collapse of the US Dollars. The shrinking in its interest rates would make it less enticing, compelling investors to contemplate deposits in other currencies. With this, the US Dollar is at a threat of losing its perceived safe-haven reputation and might not be able to secure its status as world reserve currency.
Bitcoin is currently a standout amongst other performing assets of the year, notwithstanding, with the coming of the US elections which is expected to bring about the weakness of the dollar, we can anticipate a further fuelling of the top coin for the remainder of 2020.