Bitcoin edged higher during the New York trading session Tuesday as an indirect consequence of the run-off Senate elections in Georgia that could determine the future of the dollar, coronavirus stimulus, and taxation.
The benchmark cryptocurrency rose as much as 2.28 percent while its top-cap rival tokens followed suit before paring back gains by mid-morning. Most recently, the BTC/USD exchange rate was near $32,500, up 18.33 percent from its week-to-date low. It was still trading 6.75 percent lower from its record high of $34,810.
So it seems, Bitcoin traders are closely watching the ongoing Georgia run-off elections for its ability to determine the cryptocurrency’s bullish momentum. If Democrats take control of the Senate, it will allow President-elect Joe Biden’s administration to introduce additional fiscal stimulus.
Bitcoin versus Dollar
The US dollar looked cautious about the outcome on Tuesday. Its value against a basket of foreign currencies fell by 0.45 percent to its lowest since April 2018. Meanwhile, volatility in the equity market—which surged—also reduced the government debt’s appeal. It left investors and traders with little options to park their capital.
Bitcoin lately did well against a bearish US dollar outlook. The cryptocurrency surged by more than 800 percent from its mid-March nadir. The same period saw the US dollar index losing more than 12 percent of its value. All happened due to the Federal Reserve’s open-ended debt purchasing program, coupled with the US government’s $3.2 trillion package.
The year-long fractal served as an ideal reminder that Bitcoin could surge further if the Democrats win Georgia. Conversely, a Republican win might add short-term downside pressure on the cryptocurrency on the dollar’s hopeful pullback. But even that wouldn’t hurt Bitcoin in the long run—as long as the Fed achieves maximum employment and an inflation rate above 2 percent.
Nikolaos Panigirtzoglou and his team of strategists at JPMorgan wrote in a note on Monday that Bitcoin could benefit hugely as investors hunt for alternatives to gold—another safe-haven asset that does well when the dollar declines.
“A crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin over the long term,” they noted. “Bitcoin’s market capitalization of around $575 billion would have to rise by 4.6 times — for a theoretical bitcoin price of $146,000 — to match the total private sector investment in gold via exchange-traded funds or bars and coins.”
Lately, billionaire investors such as Paul Tudor Jones and Stan Druckenmiller have purchased Bitcoin against their inflation fears. Corporate firms, including MassMutual, Ruffer Investments, MicroStrategy, Square, and others, have also invested in the cryptocurrency.
Payment giant PayPal has also started providing bitcoin payment and custodial services in the US.