June 11th, 2024

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Bitcoin for (your) President

If you haven’t noticed by now, Bitcoin has become a hot political topic this year- and that shouldn’t surprise you. During 2024, over 64 countries representing 49% of the global population are holding elections, and voters want access to better money after seeing how their currencies got debased during the COVID pandemic. They want answers, and they want change. 

It’s only May, and we have already seen colossal political wins for Bitcoin-friendly politicians in different parts of the world. This past February, Nayib Bukele easily won his reelection In El Salvador, which speaks volume to the country’s Bitcoin strategy. Elsewhere, Bitcoin and Crypto-friendly candidates won the presidency of Argentina, and have been rising up the polls in the U.S..

This article will look at the election results to date, the political dynamics shaping up in the remaining elections in 2024, along with potential surprises and election races to watch. We then translate this to potential market and price implications for bitcoin and digital assets.

How Elections Impact Asset Prices

As we’ve written about here before, election years are generally good for asset prices on average. Conceptually, that’s because of the economic dynamics and incentives associated with an election. Incumbent politicians want to get re-elected, so they want favorable economic conditions as the backdrop of the election. Challengers want to lure voters as well, so they too promise policies and programs that would stimulate the economy. 

There are many studies and research papers to support that economies, in general, do very well during election years. One of the the cleanest ways to see this effect is by looking at the numbers in the U.S.:

According to a report from Morgan Stanley, there have been 23 elections since the S&P 500 Index began. In these election years: 19 of the 23 years (83%) provided positive performance, and the average return was +11.28%. 

This is a global phenomenon, not limited to the U.S. 

Every president has the same (or very similar) set of incentives. In other words, election years are typically good for business - regardless of the business!

But wait, there’s more!

Elections are good for markets because they tend to supercharge economies with fresh money. But that’s not everything– If an industry or topic is large and important enough, it becomes an election topic. Until recently, very few candidates or parties had openly supported or ran on a pro-bitcoin campaign. But that’s changed! Nayib Bukele, who the IMF called “irresponsible” when he made Bitcoin legal tender for El Salvador in 2021, has completely transformed the country and won reelection in 2023 by a landslide. Javier Milei ran with a pro-bitcoin and anti-central bank campaign in Argentina and won earlier this year as well - within months, Argentina posted the first budget surplus in over a decade. 

The message is clear. People want Bitcoin. They want better money, and they will elect politicians that stand for it.

Candidates and parties that have adopted and supported bitcoin strategies have been winning. This is also not surprising– the people in Guatemala and Nicaragua that watched the transformation of El Salvador want their economies transformed as well. If the Bitcoin formula worked for El Salvador and Argentina, why not try it? That makes this global election cycle even more relevant for bitcoin and crypto. 

These realities are being reflected in the polls, and politicians around the world are adjusting their campaign platforms accordingly. 

Pandering to Bitcoin 

This political pandering to get the support of the Bitcoin and crypto industry is perhaps most evident in the U.S.. Just last week, Republican Presidential candidate Donald Trump openly declared his full support for bitcoin, self custody, the crypto industry, and promised to stand against the Democratic party’s “anti-crypto” army. 

On the Democrat side, Democratic Members in the Congress and the Senate voted to repeal order SAB 121, put forward by the Democratic-leaning SEC, that places unreasonable restrictions for banks and other large financial institutions to interact with Bitcoin. The vote was encouraging for the industry as it signalled a will to work with the industry from the Democratic side, but the excitement was short-lived when President Joe Biden vetoed the repeal. However, this shows cracks are emerging within the Democratic party around their anti-crypto stance.

Beyond the political party and the presidential race, the blockbuster success of the spot Bitcoin ETF on Wall Street has led to the approval of the spot Ethereum ETFs. 

This, once again, signals that Wall Street is very comfortable with crypto as an asset class, and they want to do more.  For this they need clear regulations, and they are signalling that they are willing to do the necessary political lobbying to make it happen. Even if it means helping to change whoever is in power now by supporting specific political action groups.

When you marry the financial support from big U.S. banks and the crypto industry for lobbying, and a favorable public perception of the technology, you have all of the ingredients you need to make political change happen. 

Where the waves of change are heading

Now let’s take a look at the major elections globally through 2024 and what they could mean for Bitcoin.

June:

European Parliament - June 6th-9th: Europe is working to roll out the Markets in Crypto Assets regulatory framework, which has been championed by the incumbent progressive-marjority parliament. Unlike in the U.S., the conservative parties in the EU would mean potentially stricter crypto regulation, and a setback to the MiCA framework. In other words, if more votes “swing right”, this could complicate the rollout of the harmonized MiCA regulatory framework for digital assets in Europe.

Iran: Iran doesn’t really have free elections, or free press, so it’s hard to discern the current political landscape around bitcoin and crypto regulation. 

July:

United Kingdom - July 4th: Analysts expect that the current Conservative party leadership will lose to the Labour party, which would end 14 years of Conservative rule. In terms of crypto regulation in the U.K., a stablecoin bill has stalled until the new government is formed. While material progress has not been made under Conservative leadership, the change of guard represents an opportunity to re-engage with the government. 

Venezuela - July 28th: This one hits home. Venezuela’s electoral system is far from fair, but in life, everything is possible. In the words of Victor Hugo “Nothing else in the world…not all the armies…is so powerful as an idea whose time has come.”. Maria Corina Machado seems to have found an answer to the cheating and the tricks utilized by the Maduro regime to fragment the opposition and discourage voters. 

Maduro has a history of disqualifying anyone who is leading at the polls, and predictably, he did that with Maria Corina. Except, this time, the opposition has remained united and rallied behind what is effectively a proxy candidate to her, appearing together at all times. He is leading Maduro in the polls 6:1. 

Venezuela gaining back freedom could be a wildcard not just for Bitcoin and Crypto, but for the region at large. Once the greatest oil producer in the region, a roaring back in Venezuelan oil production could do wonders to the global economy. 

What does this mean for Bitcoin? The incumbent regime has shut down all mining operations after operating a years-long witch hunt against the crypto industry.

Meanwhile, the Venezuelan opposition is very much pro-crypto. Leopoldo Lopez, one of Maria Corina’s main supporters, was just on our podcast discussing his views for Bitcoin and digital assets in a free Venezuela. You can check it out here.

We’ll dive deeper into the Venezuelan elections in a future essay.

September:

Algeria, and Romania: Bitcoin and crypto regulation have not been key topics in either election.

October:

Mozambique, Georgia, Uruguay: Bitcoin and crypto regulation have not been key topics in either election.

Lithuania - October 6th: The Lithuanian government has been making a regulatory push and cracking down on the crypto industry to ensure it can meet the licensing requirements to apply the European Union regulatory framework locally before the June 2025 deadline. Regardless of the political outcome, this trend should continue. 

November: 

United States - November 5th: The world’s largest economy goes to the polls this year to elect a new president and the stakes for Bitcoin and the crypto industry could not be higher. 

As we discussed in the “Pandering to Bitcoin” section above, the incumbent Democratic party has not been friendly to the industry over the last 4 years, but cracks are starting to appear in their Anti-crypto stance. 

Conversely, Republican candidate Donald Trump has fully embraced the industry, calling for a favorable regulatory framework, vowing to keep Elizabeth Warren’s anti-crypto army away from people’s bitcoin, and to free Ross Ulbritch if he is elected president. 

Mr. Trump has been getting guidance and advice on his Bitcoin and crypto platform from the likes of Vivek Ramasawy, Ryan Selkis from Messari, and David Bailey from Bitcoin Magazine. All of whom understand what the industry needs and how to speak to the constituents. The outcome of this election could materially change the trajectory of Bitcoin regulation and the global market structure of the industry.

December:

Ghana: Bitcoin and crypto regulation have not been key topics in either election.

What happens next?

Why should investors care about elections? Just look at what happened in Mexico over the weekend:

The Mexican peso is down 4% this morning after a landslide victory from the left-leaning party. The supermajority means that the new government could completely rewrite the country’s constitution without having to negotiate with any other party in the opposition. Not surprisingly, investors are voting with their wallets, and selling Mexican pesos and stocks in exchange for U.S. dollars and Bitcoin. The Nasdaq Mexican stock market index ($MXN) is down -2% today, the Mexican Peso is down -4% today and Bitcoin is up +2%. 

The polls and the newspapers might say that the country is happy, but the investor community is ringing the alarms, and asset prices reflect that. 

To stay on top of all upcoming elections and their potential impact on the markets, make sure to follow our X account where we post our weekly Bitcoin Economic Calendars, highlighting all market-moving events for the week ahead. We will also be diving deeper into the Venezuelan and U.S. elections in further issues. 

And no matter who wins… HODL!

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