Donald Trump’s former chief of staff, Mick Mulvaney, says a Joe Biden presidency would cause a „flood“ of regulations. Some economists also expressed concern that the Biden administration would cause a stock market crash.
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This led many crypto-currency analysts to reflect on the impact that a sharp stock market decline would have on the price of Bitcoin (BTC).
During an interview on CNBC’s Squawk Box, Mulvaney said that Biden would push through many regulations in a very short period of time. He said:
„If Trump wins, you’ll see more of the same. He has set the parameters according to his attitude about regulations. If Joe Biden wins, you’ll see an absolute avalanche of regulation in a very short period of time.
Skew’s data shows that Bitcoin has had a higher correlation with gold than with stocks over the past few months. Therefore, we could argue that a slowdown in the stock market could boost the sentiment of buying Bitcoin.
The correlation between Bitcoin and gold
But as we’ve seen from March to April, a bearish sentiment in the stock market could diminish Bitcoin’s momentum.
Economists are also pessimistic
According to University of Maryland Finance Professor David Kass, a tax rate increase under a possible Biden administration would lead to lower profits. Over time, declining profits could cause a drop in stock prices, leading to a drop in the stock market. Kass said:
„The increase in the tax rate will result in lower profits and probably a drop in the stock price. This effect may be more than offset by a broader fiscal stimulus package passed by Congress and improved trade relations with countries in Europe as well as China.
Other studies show that a Biden presidency could have little impact on stock market trends.
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The WSJ says that historical data indicates that the choice of Biden could allow the stock market to maintain an average annual gain of 10%. Ed Finn, a WSJ editorial contributor, wrote:
„It is even possible that U.S. investors will enjoy annual returns on shares of 15% or more during Biden’s administration.
However, there are two possible scenarios, in which a drop in stock is likely to affect Bitcoin’s price as well.
First, if it causes sentiment around safe assets such as gold to improve, it could increase the chances that we’ll see another bullish run by BTC.
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Second, a stock drop could affect gold and Bitcoin as much as it did in March. If the latter scenario occurs, most assets, with the exception of U.S. Treasury bonds, are likely to be affected.