The Upcoming US elections could pose a huge risk for Bitcoin as the asset broke through the $12,000 and started crashing right after. Gold also set a new all-time high but has since pulled back while the S&P 500 keeps on setting higher highs so let’s read more in today’s Bitcoin news.
All of these assets have one thing in common: they are all at risk for a sizable correction because of the upcoming US elections scheduled for November. President Donald Trump will defend his presidency against the former vice president Joe Biden. An election is always a pivotal event for the United States but also for the global financial market.
The uncertainty of the potential regime could change how that will impact corporate tax laws as it leads to large shifts in sentiment before the Presidential election. For example, when Trump took over the office, it kicked off another bull market for bitcoin and for the stocks. The analysts are expecting that Joe Biden will win and the same analysts are worried that during one of the biggest recoveries and peak exuberance, his win will not be priced in.
The markets are in for a huge shakeup and this could be due to the uncertainty around the Presidential election. The CBOE VIX Index which is a volatility index looks at the volatility in the S&P 500, rises every election year, and signals general explosiveness overall. Due to the pandemic, however, and the current economic factors with the political unrest, the indicator has never been higher in an election year.
While the indicator doesn’t impact on Bitcoin, the last time it was overheated was during the Black Thursday event. Since then, Bitcoin became correlated with the S&P 500 stock market index that it never had before its entire existence. Whether this means that Bitcoin is caught in with a different investor type or there are other dynamics at play, we cannot be sure. However, the correlation in the past two quarters since the pandemic struck, cannot be denied. In the past, Bitcoin was not able to take out on the previous all-time high until the election was over and the president was sworn in.
This time, the market could repeat a win from Trump as the analysts explain his win will create a more favorable environment for the corporate world to thrive even further.
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