Crypto Will Win No Matter What

As you stand in line to vote today, know that while this election has been the cause of unprecedented market anxiety, ultimately, the election outcome doesn’t determine crypto’s continued success.

There are more powerful forces at work which have much more influence on our dear industry. The state of Bitcoin, anticipated rate cuts from the Federal Reserve, China’s economic stimulus, and the U.S. fiscal deficit will impact crypto far more significantly than any election outcome. 

While waiting for the election’s results, take stock of why these factors will matter more for crypto’s trajectory than the next president.

Bitcoin’s Current Market Health

To start off, Bitcoin’s market conditions, coupled with network statistics and the period it is entering in its cycle, paint a positive picture of strong future growth potential. 

Despite nearly breaking all-time highs last week, Bitcoin looks to have very low speculative retail activity — evident in low spot trading volume, the amount of Bitcoin held on exchanges, and Google searches for Bitcoin. Particularly, the level of active addresses and exchange volumes is comparable to previous low-speculation periods like 2016, 2018, and 2019. Further, the overall level of total Bitcoin holders continues to hit new all-time highs globally, which is a positive trend for asset distribution. In other words, Bitcoin has been able to nearly break all-time highs with incredibly low levels of speculative behavior, nowhere near that of 2020 or 2021 yet. 

At the same time, Bitcoin mining has become more difficult than ever, demonstrating robust network security – at the price of industry consolidation. Larger, better-capitalized miners have remained as smaller players get out-competed, leading to many mergers and acquisitions. This is expected following halvings and comes with a period of miners selling as they adjust to the network’s new economics. After several months, though, the selling usually stops, marking a capitulation event that can signal the kickoff of the next leg up for Bitcoin. At this point, miner revenue jumps, as it has since September. Historically, when mining revenue climbs above the 365-day moving average, it often signals the onset of a Bitcoin bull run. This is all happening as Bitcoin enters the third year of its four-year cycle, which is historically a period where it makes most of its gains.

With Bitcoin’s strong fundamentals and low speculative activity, it’s well-positioned to benefit from rising global liquidity, which could drive a new phase of sustained growth.

Federal Reserve Rate Cuts

On Thursday, the Federal Reserve will announce its next interest rate decision, which, given the recent non-farm payroll print, is highly anticipated to be a 25 basis point cut. 

While last week’s jolting drop in payrolls may be partly attributed to the past month’s hurricanes, the revisions of the previous months' payroll data show job gains mostly come from the public sector, while the private market is experiencing constriction and needing relief, which lower rates could help stimulate. Further, inflation, once a top concern, is also easing, especially in housing. This sets the stage for rate cuts to help support the economy by making borrowing cheaper.

For markets, including crypto, these rate cuts mean more liquidity, as cheaper borrowing allows investors to access funds more easily. This extra cash tends to flow into markets, making rate cuts a tailwind for Bitcoin and other assets that thrive in high-liquidity environments.

China’s Need For Economic Stimulus

Outside of the U.S., China, the world’s second-largest economy, is facing significant challenges, with weak consumer spending, a struggling real estate market, and an unresponsive stock market, which has not responded well to previous recovery efforts. To address these issues, China is preparing a large stimulus package, with details expected to be finalized this week at the NPC Standing Committee in Beijing.

Market estimates for the package range widely, from 2T to as high as 10T yuan ($280B to $1.4T), aimed at stabilizing the property market, boosting infrastructure spending, and providing a buffer against potential U.S. trade pressures. Given China’s massive role in the global economy, any major moves to inject liquidity through stimulus or quantitative easing (QE) could ripple across global markets, fueling demand for assets like Bitcoin and crypto that benefit from rising liquidity levels.

This approach will likely include QE, where China’s central bank, the PBOC, would buy government debt to pump money into the economy. The Standing Committee has previously instituted measures to support growth, such as last October when it approved an additional 1T yuan in stimulus to help meet GDP targets and aid disaster relief.

When China enacted this stimulus last year, its M1 money supply surged, followed, notably, by Bitcoin’s rally into 2024. While Bitcoin ETF news from the U.S. also played a role, Bitcoin’s upward trend stalled when China’s M1 growth reversed, eventually declining into negative territory for the first time in years. This shift highlights how changes in China’s liquidity can influence Bitcoin demand.

Overall, the current state of China’s economy provides a strong impetus to ramp up its stimulus, which would fuel Bitcoin and crypto overall.

The U.S. Deficit

The U.S. deficit is an enduring challenge that will likely continue regardless of election outcomes, leaving the government with few options beyond increasing liquidity through borrowing or money printing.

Both Democrats and Republicans are committed to funding essential programs like Social Security, Medicare, and military spending, which strain the federal budget. As the population ages, Social Security costs are rising, and funds are projected to run out by 2035 if changes aren’t made. Healthcare costs are also climbing due to an expensive system that doesn’t always improve outcomes, and military spending remains high at over $800B a year. Higher interest rates make it more costly for the government to pay interest on the national debt, adding pressure to print money to fund these programs and manage the debt.

With so much of the budget locked into these programs, there’s little flexibility to cut spending. Both parties consider these programs “untouchable,” making it difficult to reduce the deficit meaningfully. To cover these high costs, whichever party ascends to power will likely need to rely on borrowing or quantitative easing, creating more money to fund these expenses. In turn, this will increase the money supply, boost liquidity in the economy, and drive up asset prices, which will prove lucrative for Bitcoin and crypto as more money simply means more fuel for risk assets. 

Overall, with the need for QE expected to continue to meet budget demands, Bitcoin stands to benefit, attracting value in an economy with growing government debt and spending.

In Closing

The U.S. election may be front and center, but larger economic forces shaping global markets will likely have a more lasting impact on Bitcoin’s trajectory. 

Global liquidity is increasing, with rate cuts underway in the U.S., a substantial stimulus package underway in China, with further need to print from the ongoing fiscal pressures in the U.S. These forces are now joined by easing policies in other parts of the world, including recent rate cuts in the U.K. and similar moves across other countries. Overall, this collective wave of monetary easing creates an environment benefiting assets like Bitcoin and crypto that thrive in high-liquidity conditions. 

We can already see the effects of this environment on other major assets. Gold and the S&P 500 have continued to make record highs alongside flagship growth stocks like Nvidia. Bitcoin, like these assets, will benefit from increased global liquidity, regardless of who takes office.

Overall, the underlying economic conditions are laying the groundwork for Bitcoin’s continued growth, far beyond the immediate outcome of the election.