It's no secret that politics influences crypto prices—and vice versa. We look at how the upcoming election could impact your portfolio.
It’s no secret that politics influence crypto prices. Most recently, Bitcoin prices soared above $60,000 following the attempted assassination of former President Trump—an event that sent his odds of winning up 10 points to 70% on Polimarket, o piață de predicții.
At the same time, crypto’s influence on politics has increased, with political action committees like Fairshake raising nearly $200 million in funds that it regularly deploys to influence legislation, according to Deschideți Secretele de date.
But what’s behind these movements? How might the election impact crypto? And how might crypto influence the election?
What Drives Crypto Prices?
Many factors influence crypto prices—but not always in predictable ways.
For example, some people see Bitcoin as a hedge against inflation, but while U.S. inflation began rising in March 2021, Bitcoin prices were already near their highs. And as inflation rose from 4.2% in April 2021 to 5.4% in July 2021, prices fell from over $60,000 to $33,000, suggesting that it’s not necessarily an effective hedge.
Other people see Bitcoin as a hedge against risk. However, as with inflation, this correlation fails to hold consistently. While Bitcoin prices rose in response to an increase in the Volatility Index (VIX) in late 2020, the cryptocurrency fell in late 2022, when there was a similar increase, and then soared in 2024 despite lower readings.
So, regarding the election, it’s not always safe to assume that Bitcoin prices will rise alongside perceived political risks or adjusted inflationary outlooks.
The reality is more nuanced: Many events affect price movements.
For instance, the launch of fonduri tranzacționate la schimb criptografic la vedere (ETFs) sharply increased Bitcoin prices in early 2024. This jump more than offset a slowdown in demand due to less perceived risk in the market (e.g., the falling VIX readings).
The challenge is figuring out the magnitude of each event’s impact and determining how these signals impact price.
Crypto’s Evolving Dynamics
The crypto industry continues to evolve, which could also change price dynamics.
Right now, many crypto assets are driven by speculators rather than long-term investors. For instance, River Financial estimates that individuals own the lion’s share of Bitcoin, and they’re much more likely to buy and sell based on short-term sentiment than long-term institutional investors like pension funds or governments.
Estimation of Bitcoin ownership. Source: River
However, as more capital flows into crypto ETFs, mainstream investors could have more influence than speculators. If that happens, Bitcoin prices could react more like stock indexes and less a volatile speculative asset. Pension funds and other institutional investors are less likely to sell if they hold Bitcoin as a long-term allocation.
And ultimately, these changing dynamics could lead to stronger correlations with rising inflation or VIX levels, making crypto more like gold or other precious metals.
Crypto’s Impact on Politics
Only seven percent of Americans held or used crypto assets last year, but the industry is starting to have a significant impact on politics.
Crypto donors poured $94 million into federal political committees since 2023, topping the $83 million from the last election cycle. Most of these funds go into crypto super PACs, like Fairshake, which spends mostly on congressional races. For example, Fairshake spent $10 million on ads keeping Democrat Katie Porter out of an open California Senate seat.
Politicians have reacted by pushing crypto-friendly legislation through with surprising levels of bipartisan support. While Sen. Elizabeth Warren is famously anti-crypto, Senate Majority Leader Chuck Schumer and other Democrats broke with the party and supported undoing SEC guidelines that may discourage banks from holding digital assets.
In the 2024 election, many crypto influencers are aligning themselves with the Trump presidency. Elon Musk is donating more than $40 million a month to the campaign, Peter Thiel has a long-time relationship with Trump’s VP pick—JD Vance, and other VCs like Marc Andreessen and Ben Horowitz threw their support behind Trump.
That said, Biden’s decision to drop out of the race could change these dynamics if Harris or other candidates appear more tech- and crypto-friendly.
Regardless of the 2024 election outcome, these developments could lead to a more mature ecosystem with greater regulatory clarity if campaign contributions continue to sway politicians to enact favorable regulations around the industry.
Where Politicians Stand
Most of the crypto industry’s frustrations stem from the SEC and its Chairman, Gary Gensler, who has aggressively pursued the industry.
President Biden appointed Mr. Gensler in 2021, and the administration has had a palmares mixt over the years. While seemingly aware of the need for digital innovation, the administration has supported the SEC’s crackdown and the IRS’ move to require exchanges to collect customer information and provide Form 1099-DAs.
On the other hand, former President Trump recently promised to “get out of the way of innovation” if elected president. Some crypto industry supporters, including two former chairs of the Commodity Futures Trading Commission (CFTC), are suggesting potential nominees for SEC commissioner to replace Mr. Gensler.
JD Vance, Trump’s Vice President pick, is also a well-known supporter of the crypto industry, with deep ties to crypto-friendly personalities like Peter Thiel. That said, Vance’s plans might enjoy less bipartisan support than legislation in the House, which means the industry may have to choose between an ideal solution to getting something done.
That said, Democratic leaders have been softening their tone in recent months. In July, a senior advisor to President Biden met with dozens of crypto leaders at a roundtable organized by Rep. Ro Khanna. The meeting included Sen. Kirsten Gillibrand, Rep. Joe Neguse, and billionaire Mark Cuban—a crypto supporter and Biden backer.
Now that Biden has dropped out of the race, all eyes are on Harris’ crypto stance. As Senator of California, many perceive her as crypto-friendly, but opinions may change as her advisory team takes shape. Ultimately, the biggest question will be whether she would appoint a new SEC Chairman who is more crypto-friendly.
Linia de jos
Crypto and politics are intertwined on several levels.
The political parties in control exert tremendous direct and indirect influence over the crypto ecosystem through their policies. For instance, the Biden administration’s appointment of Gary Gensler began a crackdown on securities violations, which has had a major chilling effect on the broader industry.
On the other hand, the crypto industry can significantly impact politicians through super PACs and their contributions. These contributions could sway the choices and policies that politicians support in practice.
When assessing the impact of the upcoming elections on crypto, investors should carefully consider all factors that could influence prices.
If you trade crypto assets, ZenLedger can help you organize everything for tax time to avoid problems with the IRS. Our platform aggregates transactions across wallets and exchanges, computes your capital gain or loss, and generates the tax paperwork you must file each year. You can also find opportunities to harvest tax losses!
Acest material a fost pregătit doar în scop informativ și nu trebuie interpretat ca sfat profesional. Vă rugăm să solicitați consultanță juridică, financiară, fiscală sau de altă natură, specifică situației dumneavoastră particulare.
Cum ar putea avea impact alegerile din 2024 pe piața cripto
It’s no secret that politics influence crypto prices. Most recently, Bitcoin prices soared above $60,000 following the attempted assassination of former President Trump—an event that sent his odds of winning up 10 points to 70% on Polimarket, o piață de predicții.
At the same time, crypto’s influence on politics has increased, with political action committees like Fairshake raising nearly $200 million in funds that it regularly deploys to influence legislation, according to Deschideți Secretele de date.
But what’s behind these movements? How might the election impact crypto? And how might crypto influence the election?
What Drives Crypto Prices?
Many factors influence crypto prices—but not always in predictable ways.
For example, some people see Bitcoin as a hedge against inflation, but while U.S. inflation began rising in March 2021, Bitcoin prices were already near their highs. And as inflation rose from 4.2% in April 2021 to 5.4% in July 2021, prices fell from over $60,000 to $33,000, suggesting that it’s not necessarily an effective hedge.
Other people see Bitcoin as a hedge against risk. However, as with inflation, this correlation fails to hold consistently. While Bitcoin prices rose in response to an increase in the Volatility Index (VIX) in late 2020, the cryptocurrency fell in late 2022, when there was a similar increase, and then soared in 2024 despite lower readings.
So, regarding the election, it’s not always safe to assume that Bitcoin prices will rise alongside perceived political risks or adjusted inflationary outlooks.
The reality is more nuanced: Many events affect price movements.
For instance, the launch of fonduri tranzacționate la schimb criptografic la vedere (ETFs) sharply increased Bitcoin prices in early 2024. This jump more than offset a slowdown in demand due to less perceived risk in the market (e.g., the falling VIX readings).
The challenge is figuring out the magnitude of each event’s impact and determining how these signals impact price.
Crypto’s Evolving Dynamics
The crypto industry continues to evolve, which could also change price dynamics.
Right now, many crypto assets are driven by speculators rather than long-term investors. For instance, River Financial estimates that individuals own the lion’s share of Bitcoin, and they’re much more likely to buy and sell based on short-term sentiment than long-term institutional investors like pension funds or governments.
Estimation of Bitcoin ownership. Source: River
However, as more capital flows into crypto ETFs, mainstream investors could have more influence than speculators. If that happens, Bitcoin prices could react more like stock indexes and less a volatile speculative asset. Pension funds and other institutional investors are less likely to sell if they hold Bitcoin as a long-term allocation.
And ultimately, these changing dynamics could lead to stronger correlations with rising inflation or VIX levels, making crypto more like gold or other precious metals.
Crypto’s Impact on Politics
Only seven percent of Americans held or used crypto assets last year, but the industry is starting to have a significant impact on politics.
Crypto donors poured $94 million into federal political committees since 2023, topping the $83 million from the last election cycle. Most of these funds go into crypto super PACs, like Fairshake, which spends mostly on congressional races. For example, Fairshake spent $10 million on ads keeping Democrat Katie Porter out of an open California Senate seat.
Politicians have reacted by pushing crypto-friendly legislation through with surprising levels of bipartisan support. While Sen. Elizabeth Warren is famously anti-crypto, Senate Majority Leader Chuck Schumer and other Democrats broke with the party and supported undoing SEC guidelines that may discourage banks from holding digital assets.
In the 2024 election, many crypto influencers are aligning themselves with the Trump presidency. Elon Musk is donating more than $40 million a month to the campaign, Peter Thiel has a long-time relationship with Trump’s VP pick—JD Vance, and other VCs like Marc Andreessen and Ben Horowitz threw their support behind Trump.
That said, Biden’s decision to drop out of the race could change these dynamics if Harris or other candidates appear more tech- and crypto-friendly.
Regardless of the 2024 election outcome, these developments could lead to a more mature ecosystem with greater regulatory clarity if campaign contributions continue to sway politicians to enact favorable regulations around the industry.
Where Politicians Stand
Most of the crypto industry’s frustrations stem from the SEC and its Chairman, Gary Gensler, who has aggressively pursued the industry.
President Biden appointed Mr. Gensler in 2021, and the administration has had a palmares mixt over the years. While seemingly aware of the need for digital innovation, the administration has supported the SEC’s crackdown and the IRS’ move to require exchanges to collect customer information and provide Form 1099-DAs.
On the other hand, former President Trump recently promised to “get out of the way of innovation” if elected president. Some crypto industry supporters, including two former chairs of the Commodity Futures Trading Commission (CFTC), are suggesting potential nominees for SEC commissioner to replace Mr. Gensler.
JD Vance, Trump’s Vice President pick, is also a well-known supporter of the crypto industry, with deep ties to crypto-friendly personalities like Peter Thiel. That said, Vance’s plans might enjoy less bipartisan support than legislation in the House, which means the industry may have to choose between an ideal solution to getting something done.
That said, Democratic leaders have been softening their tone in recent months. In July, a senior advisor to President Biden met with dozens of crypto leaders at a roundtable organized by Rep. Ro Khanna. The meeting included Sen. Kirsten Gillibrand, Rep. Joe Neguse, and billionaire Mark Cuban—a crypto supporter and Biden backer.
Now that Biden has dropped out of the race, all eyes are on Harris’ crypto stance. As Senator of California, many perceive her as crypto-friendly, but opinions may change as her advisory team takes shape. Ultimately, the biggest question will be whether she would appoint a new SEC Chairman who is more crypto-friendly.
Linia de jos
Crypto and politics are intertwined on several levels.
The political parties in control exert tremendous direct and indirect influence over the crypto ecosystem through their policies. For instance, the Biden administration’s appointment of Gary Gensler began a crackdown on securities violations, which has had a major chilling effect on the broader industry.
On the other hand, the crypto industry can significantly impact politicians through super PACs and their contributions. These contributions could sway the choices and policies that politicians support in practice.
When assessing the impact of the upcoming elections on crypto, investors should carefully consider all factors that could influence prices.
If you trade crypto assets, ZenLedger can help you organize everything for tax time to avoid problems with the IRS. Our platform aggregates transactions across wallets and exchanges, computes your capital gain or loss, and generates the tax paperwork you must file each year. You can also find opportunities to harvest tax losses!
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Acest material a fost pregătit doar în scop informativ și nu trebuie interpretat ca sfat profesional. Vă rugăm să solicitați consultanță juridică, financiară, fiscală sau de altă natură, specifică situației dumneavoastră particulare.
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