U.S. Election Puts $1,000 Bitcoin Within Reach

In my now bi-weekly look at Bitcoin I tend to focus on the news rather than the price. Bitcoin is a long-term challenge to banking and even money as we know it, and I have felt that progress in terms of recognition and understanding is more important than the vagaries of the market.

The price can take care of itself.

I last looked at price back in April, when I argued that the long term chart for BTC/USD was supportive of the bull case. At that time BTC/USD was trading at around $425, and is now around $576, about 35 percent higher, so I guess that worked out okay.  The recent consolidation above $500, though, prompts an interesting question, and one that many people thought would never again be asked, or at least not for a long time: Is BTC/USD above $1000 a possibility in the near future?

To many it may seem as if a nearly 100 percent increase in price is not something that is realistic in any foreseeable time, but it should be pointed out that the aforementioned 35 percent increase came over only a couple of months and that BTC/USD has doubled in the last eight months. In a volatile, new market such as Bitcoin extreme moves in short periods of time are distinctly possible; oversized reaction to news and events is par for the course, and the next few months certainly promise to provide some stimuli.

First and foremost, the U.S. is entering an election season that, bar some extraordinary intervention, promises to be historic, but not just because a woman is running as the candidate for a major party for the first time. It is because the level of dislike and distrust for both candidates is at an all time high.

Figure 1: Coindesk BPI 1 Year. Source: Coindesk.com

As a Snapchat story shown to me by my teenage daughter yesterday put it, America is embarking on the biggest game of “Would you rather…” ever. It may be that as that campaign develops, the attitude to both candidates will change as they show us the serious, fair-minded, policy driven sides of their character.

Seriously, that could happen.

Far more likely, though, is that as the campaign gets down and dirty, public disillusion will increase and an atmosphere of uncertainty will take hold. In normal circumstances that would not be beneficial to a market such as Bitcoin with a history of volatility and a reputation for extreme risk, but these are not normal circumstances. The candidate for the Republicans, who usually have a strong accent on fiscal and monetary constraint, is on record as saying that sovereign debt can be “renegotiated” and isn’t a problem if you control the printing presses.

Any repeat of that kind of language from Trump as the election approaches, or even constant repetition of his words by the Democrats, could have a lot of people worried about the future value of the currency in their pockets, and not just in the U.S. The dollar’s role as a reserve currency makes excessive dollar supply an inflationary force for the whole world. Gold would be one obvious beneficiary in that situation but the portability and spendability of Bitcoin would make that an attractive option for many people.

Belief in economic growth and strength around the world is already fragile after the OECD recently became the latest international group to downgrade global GDP growth forecasts and to warn of a “growth trap.” In that atmosphere many would normally look to the U.S. for leadership, but with two massively unpopular candidates fighting a heated election battle there is not likely to be much of that on display over the next few months.

Given all of that, BTC/USD at $1000 doesn’t look quite so far away.