Cryptocurrency's US Election Predictions and Post-Results

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brianq
Nov 11, 2020

It appears that the United States has a new president come January, 2021. Some are still firmly in the camp of these results not being official until everything is fully tabulated (or re-tabulated for certain states like Georgia and Michigan). But regardless, it appears that Joe Biden will more than likely be taking his seat in the oval office in roughly two months. The question is... what does this mean for cryptocurrency?


Leading up to this election, many were of the belief that incumbent Donald Trump being re-elected would be the best outcome for the S&P 500 to continue its nearly eight-month surge after Black Thursday, now up approximately 50% since late March. And the narrative that cryptocurrency and traditional markets have little correlation has changed quite a bit ever since coronavirus fears caused cryptocurrency, the S&P, and precious metals to all drop off a cliff in the early part of 2020. Let's take a look at where the correlation between Bitcoin and the S&P sits now, on a 30-day rolling average:


Historically, believe it or not, Bitcoin and the S&P 500 tend to have a correlation that hovers right around 0. This means that there is neither a propensity for both to go up or down in unison, nor do they act inversely to each others' respective prices. They literally act independently from one another. However, ever since Black Thursday, they have been much more in sync. In the early summer, Bitcoin's prce actually moved parallel to the US markets at the highest rate in its 12-year history.


Although it's become slightly less correlative now, there is still a correlation of about +0.4, between BTC and the US markets, well above their normal relationship. So why don't we check out how the prices have ebbed and flowed in direct comparison, and we'll include the price of gold as well:




Looking at this chart, it seems fair to say that Bitcoin has actually fluctuated most closely to the price of gold, particularly after the mid-March Black Thursday crash. However, about a month before the US election (early October), it appeared as though BTC played catchup with the S&P, and they began fluctuating in unison as optimism rose headed into results time this past week.


Stocks appear to be in a good position currently, and futures markets are pointing up in between market hours on Tuesday and Wednesday trading in the US yet again. Dollar yields are also on the rise, though there is some weariness remaining due to the interest rate cuts and huge borrowing rates that occurred as a reaction to the skyrocketing unemployment rates in the country due to the coronavirus.


But enough about the US economic state... Obviously we've learned there is still heavy correlation with Bitcoin and traditional markets, but many believe that the US presidency can be a boon for the crypto markets. In fact, we conducted this poll to find out exactly what


Sure enough, the Crypto Twitter community spoke, and about 58.9% felt that Trump would take this election. 76.1% of people taking this poll felt that Bitcoin would go up (regardless of whether Biden or Trump won). Barring some miracle after a recount, it appears as though the crowd got 1 out of 2 of these parts correct, with BTC surging +8.93% since election night on November 3rd, and +3.78% since the announcement of Biden as the projected winner (the non-predicted crypto president).


One may argue that because there is a heavier than average Bitcoin correlation to the stock market currently, that this could be simply tied to the heavy upswing the markets have experienced this past week as investors reacted positively as it became more evident that Biden was winning.


Shortly after this projection was made fairly unanimously across the country this past weekend, we asked our followers how their perception of crypto as an investment may have changed as a result of the election results. And not surprisingly, the results showed that most people's expectations of crypto hadn't changed based on the news. However, it was very interesting to see that almost as many people had actually become more bullish than prior to the election results:

This high amount of people who believed cryptocurrency was a more bullish asset class, mildly contradicts the first poll. Most believed that Trump would win, but that looks to not be the case. This can, of course, be an indication that people simply wanted the election to be put in the past so the country (and world) could move forward. But more likely, the crowd had already become significantly more bullish between election night #1 on Nov. 3rd (BTC at $14.1k) and Nov. 9th (BTC at $15.3k). This +8.5% price jump very likely had most people euphoric about crypto regardless of the candidate chosen.



Some argued that markets were actually being held down simply due to the uncertainty of how this election would go, and prices were ready to pop regardless of who was eventually the accepted (or at least, widely projected based on vote) POTUS. And it was simply a matter of a candidate being a clear (enough) winner. This is an interesting theory, and we can take a look at how social volumes fluctuated for each president to investigate this:


This chart represents the total amount of Trump and Biden mentions on crypto social platforms in the past week. The red bars are Trump, and blue represents Biden. The week essentially started as votes were being tabulated, and the race was still close. But even during the blue spikes that occurred on Saturday in the middle of this chart, it's interesting to see that 55.3% of the total mentions between the two candidates favored Trump, and this trend has continued even after Biden was announced and accepted by the US as the projected winner.


We can also see that Bitcoin took its largest dip of the week as Biden was being announced as president, and he expectedly had his highest percent of mentions during the week. Meanwhile, when Trump was being mentioned more in the beginning of the week, and as Trump began announcing his plans to contest vote counts and file lawsuits, Bitcoin's price was actually climbing again.


Perhaps it's a bit too early to tell how Biden's impact on cryptocurrency will be. But it does appear that there's enough evidence to show that the asset class did slightly favor Trump. Now that he will be transferring power to Biden, cryptocurrency traders will likely be keeping a close eye on how the dollar reacts, and whether the correlation between the traditional markets and crypto can continue. Throw in the recent news of a potential coronavirus vaccine, and there will be a second layer that Sanbase PRO members will be watching social volume on closely. But in the meantime, we simply say god bless crypto, and god bless America.

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brianq
Nov 11, 2020

Thanks for reading!

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