Bitcoin was first introduced in 2008 as a decentralized digital currency beyond the reach of any government. It has been more closely tied to political drama and policy decisions. Its recent trip from fringe technology to mainstream asset has been a doozy. That value shifts depending on market forces and political winds. This article explores how political events, such as the US Presidential election, and policy shifts, like El Salvador's adoption of Bitcoin as legal tender, are shaping Bitcoin's value and perception.
Bitcoin's Price Surge and the Political Landscape
Bitcoin’s price movements over the past few years have shown an uncanny correlation with macro political catalysts. As an example just this year, Bitcoin’s price rallied in anticipation of the Bitcoin Halvening, rising more than $35,000 in less than a month after President Trump’s election. This increase is another indication that political outcomes can have profound effects on Bitcoin’s market landscape. It reflects a growing understanding that Bitcoin has assumed a more politically charged role.
Price stability finally settled in, six months post the fourth halving event, with less than 15% volatility. It’s another example of the many complicated financial factors at play when it comes to driving Bitcoin’s value. This stability occurred even as significant political developments unfolded globally, suggesting that while political events can impact Bitcoin, other market forces are at play.
The 2024 US Presidential election has had a tremendous effect on the price of Bitcoin. This new kind of proposal is the latest sign of how Bitcoin is quickly becoming a valuable political asset. This election is a key example of how important policy outcomes are on the cryptocurrency market. It showed how quickly and dramatically partisan shifts can change investors’ equations. In fact, the biggest single day inflow into all Bitcoin ETFs occurred outside the halving period. This suggests that more overarching market sentiment and other external factors, such as political events, play a greater role in influencing investment decisions than even halving does.
Halving Events and Market Expectations
These quadrennial halving events, as they’re known, reduce the reward for mining Bitcoin by 50%. These impending occurrences have in the past often triggered explosive price run-ups. The 2016 Halving was followed by the bull run of 2017 that brought cryptocurrency into the mainstream. This changed with the 2020 halving, which set off yet another massive price surge. In both cases, traders and investors have come to expect that with each halving, a new bull run will ensue.
The fourth Bitcoin halving, which ended about one year ago, did not spark the expected bull run. Rather than crashing, Bitcoin’s price held strong, challenging both history and common sense, and forcing a reconsideration of what was actually sustaining Bitcoin’s extraordinary value. This impressive outcome is a reminder that Bitcoin halving events continue to be historically important. As Bitcoin matures, their impact is fading, driven by a wider range of factors such as political and macroeconomic events.
Additionally, every four years Bitcoin miners go through a “halvening” event. Secondly, the reward for their efforts is halved, slowing down the pace at which new coins enter circulation. This monetarily deflationary mechanism helps combat inflation, as well as preserve the scarcity of Bitcoin. This diminished supply almost always results in higher demand—ultimately increasing the price, not socialism. Many external factors can undermine the effectiveness of this mechanism. Political events, regulatory changes, and broader market sentiment add to the mix and weigh heavily on the market.
Global Policies and Institutional Adoption
Bitcoin’s path hasn’t solely been defined by regulatory battles, though there’s been moments of institutional adoption. El Salvador’s adoption of Bitcoin as legal tender last September was a first-in-the-world, historic moment. Similarly, Argentina's new libertarian president expressed support for Bitcoin, signaling a potential shift in the country's economic policies. These advancements all point to a broader pro-Bitcoin trend among political leaders and public policy decision makers.
The race for institutional bets on Bitcoin are on, as pension funds, endowments, and financial advisors are pouring billions into the asset. This institutional adoption is led primarily by institutions with a mandate to diversify portfolios and institutions needing to opportunistically benefit from Bitcoin’s high returns. The religious aspect of Bitcoin after all, the participation of institutional investors adds still more legitimacy to Bitcoin and integrates it even further into the traditional financial system.
Similarly significant on Bitcoin was China’s crypto mining ban. The alternative growing season The ban set off one of the largest migrations of Bitcoin mining operations that the industry had ever seen. Miners fled instantly to jurisdictions with more favorable regulations. This episode just as clearly illustrated how fragile, brittle, and vulnerable to regulatory whim Bitcoin is. Additionally, it emphasized the importance of geographic diversity in its mining efforts.
