Bitcoin May Surge on U.S. Fiscal Shift, Trump Win: StanChart Predicts

Key Takeaway

• Standard Chartered predicts Bitcoin will benefit from U.S. fiscal dominance and a potential Trump win, supporting cryptocurrency as an alternative asset.
• A second Trump administration could lead to looser regulation and approval of U.S. spot ETFs, positively impacting Bitcoin.
• The bank maintains a bullish Bitcoin target of $150,000 by year-end and $200,000 by the end of 2025.

Fiscal Dominance and Cryptocurrency Surge

The looming risk of U.S. fiscal dominance, characterized by the Federal Reserve's monetization of government debt, is increasingly becoming a focal point for investors, as highlighted in a recent report by investment bank Standard Chartered. This scenario, which could see a shift towards cryptocurrencies as alternative assets, is further compounded by the potential political landscape changes in the U.S. According to the report, a second Trump administration could significantly influence the regulatory environment for cryptocurrencies, potentially fostering a more supportive atmosphere. Analyst Geoff Kendrick emphasizes that Bitcoin (BTC) could serve as a robust hedge against the risks of de-dollarization and diminishing confidence in the U.S. Treasury market, suggesting a positive correlation between Bitcoin's price and the anticipated fiscal developments.

Trump's Influence on Cryptocurrency

The report delves into the potential impacts of a second Trump administration on the cryptocurrency market, suggesting an acceleration in the withdrawal of foreign official U.S. Treasury buyers due to fiscal concerns. This shift could be indicative of a broader move towards de-dollarization, with Bitcoin poised to benefit both passively from this trend and actively through expected regulatory support. The administration's stance could lead to looser regulation and the approval of U.S. spot ETFs, providing a significant boost to Bitcoin and digital assets more broadly. Standard Chartered's ambitious end-of-year target for Bitcoin stands at $150,000, with expectations of reaching $200,000 by the end of 2025.

Bitcoin's Price Momentum

Amidst these broader fiscal and political considerations, Bitcoin's price has seen a notable surge, reaching $63,470. This increase is driven by a combination of Federal Reserve policy announcements and weaker-than-expected U.S. nonfarm payrolls data, which have bolstered investor confidence in the cryptocurrency's upward trajectory. The options market has responded with a marked increase in demand for Bitcoin call options, with bets on the currency reaching as high as $100,000. This bullish sentiment is supported by analysis from various quarters, including QCP Capital and Paradigm, which highlight a strong demand for higher strike prices in the options market.

Street Views

• Geoff Kendrick, Standard Chartered (Bullish on cryptocurrencies):

  "The risk of U.S. fiscal dominance with the monetization of government debt by the Federal Reserve is growing, and such a scenario should be supportive for cryptocurrencies as investors seek out alternative assets... In a scenario of U.S. fiscal dominance, we think bitcoin (BTC) would provide a good hedge against de-dollarization and declining confidence in the U.S. Treasury market." "U.S. fiscal dominance would likely have three effects on the U.S Treasury curve: 'a steeper nominal 2 year/10 year curve, a greater increase in breakevens than real yields, and an increase in term premium'... the bitcoin price has a positive correlation with all three of these potential developments." "In addition to the passive boost to BTC from de-dollarization, we would expect a second Trump administration to be actively supportive of BTC (and digital assets more broadly) via looser regulation and the approval of U.S. spot ETFs."