Bitcoiners, already rocked by this year’s coronavirus-inflicted turbulence, face a fresh source of volatility as the market heads into the second half of 2020: the U.S. presidential elections.
According to Deutsche Bank, Germany’s biggest lender, a reelection victory by President Donald Trump could threaten the U.S. dollar’s century-long reign as the world’s de facto reserve currency.
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In a July 1 report, Deutsche Bank foreign-exchange analysts wrote that Trump, a Republican, has shaken up “policy orthodoxies and institutions” during this first term. In contrast, former Vice President Joe Biden, the presumptive Democratic nominee, would likely pursue “policies that are more predictable and mainstream, with traditional U.S. alliances valued.”
A Biden win could “help support the post-World-War-II financial architecture,” including multilateral organizations like the Group of Seven, International Monetary Fund, World Bank, World Trade Organization and North Atlantic Treaty Organization, according to Deutsche Bank.
That system propelled the U.S. tender to a dominant role in global foreign-exchange markets. The dollar is the primary currency for international payments, a staple of central-bank reserves and the price denomination for commodities from gold to oil as well as cryptocurrencies like bitcoin.
“It is plausible that President Trump can do a great deal more damage to the U.S. reserve status in a second term, and as long as Biden is prudent with his choice of Treasury Secretary and provides multilateral global leadership, the USD’s reserve status is in a safer pair of hands,” the analysts wrote.
The dollar’s reserve status is a crucial factor in the bitcoin market, since the cryptocurrency is seen by many investors as “portfolio insurance on broad-based currency debasement,” as Delphi Digital analyst Kevin Kelly phrased it in a report last week. And dollar-linked tokens known as stablecoins have become an increasingly common means of moving money around in fast-growing digital-asset markets.
The dollar has seen little erosion of its dominance so far in 2020, even as the Federal Reserve has injected about $3 trillion of freshly created money into global financial markets. That figure represents a 67% increase since Jan. 1 in the total amount of money previously created by the U.S. central bank. The U.S. Dollar Index, which tracks its value against a basket of major currencies like the euro, yen and British pound, is up 0.7% on the year.
While a Trump win might be negative for…