Impact of U.S. Elections on BTC Futures and Key Market Scenarios
Macro:
US Elections: On Tuesday 5th November, 2024, Americans go to the polls to decide on the next President of the United States for a 4-year term. The winner will take office in January 2025. This will be an important outcome for the U.S. economy, broader markets, the crypto futures market, and world economy, as the U.S. Dollar holds the reserve currency status.
Donald Trump currently leads by a thin margin in most swing states whereas his Democratic opponent Kamala Harris has been narrowing the gap in recent weeks.
Source: Newsquawk
Depending on the results, there are few scenarios that may play out and impact financial markets.
Republican Sweep:
Democratic Sweep:
For the above 2 scenarios, recessionary risks are reduced in my opinion as a Red sweep provides fiscal boost while a Blue sweep provides room to cut rates with tighter fiscal policy. In addition, as witnessed during Covid-19 shock, there was a quick economic recovery in countries that had room to provide handouts to the public to spur spending. This new mechanism of fiscal and monetary policy combination points towards reduced recessionary risks and even when recession hits, a quick recovery prospect. But how many times can this be done until it loses its effects?
A divided congress in either case will see mostly muted reaction in my opinion. Newswires and investment banks have research regarding these scenarios as they require considering many different policies, geopolitical issues, impact on the U.S. economy. I believe recessionary risks will increase for the next four years with a divided house/senate and no clear majority.
FED Interest Decision: Federal Reserves meets for another FOMC meeting to decide on interest rates path. The CME Fedwatch tool shows market participants pricing 25 bps of rate cut. However, the inflation outlook is very much dependent on the fiscal policy stance taken by the next U.S. government which will feed into FED’s inflation models and forecasts. For the first half of 2025, FED meetings on interest rate decisions and inflationary economic releases will be key to watch.
Having briefly discussed this, BTC futures can take few possible paths. CME BTC futures are equivalent to 5 BTC when checking out contract specs. Risk exposure can be reduced by trading CME MBT Micro Bitcoin futures, 1/10th the size of one bitcoin, and CME BFF, Bitcoin Friday futures, sized at 1/50 of a bitcoin, Bitcoin Friday futures is a short-dated contract that provides an accessible, capital-efficient way to manage your bitcoin trading strategies.
Big Picture for BTC Futures:
*past performance is not indicative of future results
Key Levels to Watch:
Yearly Hi: 78,960
Yearly VAH: 74,485
Bull support zone: 68,000 to 65,500
Yearly Mid: 61,495
Scenario 1:
Price has broken out of the bull flag pattern, held above yearly VPOC. Here we may see continuation higher with new All time highs. Red Sweep scenario.
FED stays conservative due to change in their inflation models keeping tighter monetary policy which points to further consolidation before another move higher by end of first quarter of 2025.
Scenario 2: Further choppy price action building acceptance above 60,000 for push in either direction.
In this scenario further clarity on the new U.S. government stance on crypto is needed before committing further.
Disclaimer: The views expressed are personal opinions and should not be interpreted as financial advice. NFA does not have regulatory oversight authority over underlying or spot virtual currency products. Derivatives involve a substantial risk of loss and are not suitable for all investors.
US Elections: On Tuesday 5th November, 2024, Americans go to the polls to decide on the next President of the United States for a 4-year term. The winner will take office in January 2025. This will be an important outcome for the U.S. economy, broader markets, the crypto futures market, and world economy, as the U.S. Dollar holds the reserve currency status.
Donald Trump currently leads by a thin margin in most swing states whereas his Democratic opponent Kamala Harris has been narrowing the gap in recent weeks.
Source: Newsquawk
Depending on the results, there are few scenarios that may play out and impact financial markets.
Republican Sweep:
- Markets will price tighter monetary policy and loose fiscal policy boosting USD. Gold will pare losses along with commodities and goods subject to tariffs.
- Trump has also come out with crypto-friendly messages, boosting BTC futures and other virtual currencies/assets.
- Treasuries will be seen falling with a steeper yield curve as noted by some banks.
Democratic Sweep:
- Markets will price more room for monetary policy and FED to cut rates as inflationary forces ease and fiscal policy is tightened under Democrats. This further boosts Gold prices. In my opinion, commodities and equities will show somewhat muted reactions while growth prospects also stay muted. However, equities will be seen higher. Views among different banks vary on growth and the U.S. stock market with a democratic sweep.
- Bitcoin futures and other virtual currencies may further consolidate or pare some losses as further clarity is required from U.S. lawmakers.
- Bonds will rise with yields falling as FED will have more room to cut rates with tighter fiscal policy.
For the above 2 scenarios, recessionary risks are reduced in my opinion as a Red sweep provides fiscal boost while a Blue sweep provides room to cut rates with tighter fiscal policy. In addition, as witnessed during Covid-19 shock, there was a quick economic recovery in countries that had room to provide handouts to the public to spur spending. This new mechanism of fiscal and monetary policy combination points towards reduced recessionary risks and even when recession hits, a quick recovery prospect. But how many times can this be done until it loses its effects?
A divided congress in either case will see mostly muted reaction in my opinion. Newswires and investment banks have research regarding these scenarios as they require considering many different policies, geopolitical issues, impact on the U.S. economy. I believe recessionary risks will increase for the next four years with a divided house/senate and no clear majority.
FED Interest Decision: Federal Reserves meets for another FOMC meeting to decide on interest rates path. The CME Fedwatch tool shows market participants pricing 25 bps of rate cut. However, the inflation outlook is very much dependent on the fiscal policy stance taken by the next U.S. government which will feed into FED’s inflation models and forecasts. For the first half of 2025, FED meetings on interest rate decisions and inflationary economic releases will be key to watch.
Having briefly discussed this, BTC futures can take few possible paths. CME BTC futures are equivalent to 5 BTC when checking out contract specs. Risk exposure can be reduced by trading CME MBT Micro Bitcoin futures, 1/10th the size of one bitcoin, and CME BFF, Bitcoin Friday futures, sized at 1/50 of a bitcoin, Bitcoin Friday futures is a short-dated contract that provides an accessible, capital-efficient way to manage your bitcoin trading strategies.
Big Picture for BTC Futures:
*past performance is not indicative of future results
Key Levels to Watch:
Yearly Hi: 78,960
Yearly VAH: 74,485
Bull support zone: 68,000 to 65,500
Yearly Mid: 61,495
Scenario 1:
Price has broken out of the bull flag pattern, held above yearly VPOC. Here we may see continuation higher with new All time highs. Red Sweep scenario.
FED stays conservative due to change in their inflation models keeping tighter monetary policy which points to further consolidation before another move higher by end of first quarter of 2025.
Scenario 2: Further choppy price action building acceptance above 60,000 for push in either direction.
In this scenario further clarity on the new U.S. government stance on crypto is needed before committing further.
Disclaimer: The views expressed are personal opinions and should not be interpreted as financial advice. NFA does not have regulatory oversight authority over underlying or spot virtual currency products. Derivatives involve a substantial risk of loss and are not suitable for all investors.
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