Bitcoin faces unusual surge after Trump’s assassination attempt: Here is why

The assassination attempt on former President Trump is not unprecedented in U.S. history.  There have been other examples of such attempts on President Abraham Lincoln, President Richard Nixon and President John F. Kennedy, among others, with some attacks reaching their intended targets. Similarly, volatility in the Bitcoin market is not new, as it has experienced even greater fluctuations in response to political turmoil and financial shocks in the past.

What happened over the weekend, however, points to a different imperative that could be much more impactful, financially and politically, given the current landscape in cryptocurrency markets and the upcoming U.S. elections.

Dr. Orhon Can Dagtekin

Trump and his changed stance on cryptocurrencies

Bitcoin, a digital currency created as a direct criticism of central banks and a hedge against inflation, has had a bumpy journey, to put it mildly.

Despite attracting funds and attention with the introduction of exchange-traded funds (ETFs) in the U.S., Bitcoin’s price has gradually declined, occasionally with sharp drops, since reaching an all-time high of just over $73,000 in March. Volatile by its very nature, the events unfolding worldwide have not been favorable for Bitcoin.

It is now well recognized that the Biden administration has not been a fan of cryptocurrencies, as the U.S. Securities and Exchange Commission (SEC) has taken steps over the past few years to tighten the regulations and increase the oversight of the players in the market.

Although their stance has eased a bit in the run-up to the election, Trump is still leading the pack by accepting donations in various cryptocurrencies in his campaign and advocating deregulatory approaches. Digital art on the blockchain is something that he is not unfamiliar with either, as the price of his non-fungible tokens (NFTs) hit an all-time high in the aftermath of the assassination attempt.

The future of Bitcoin and other cryptocurrencies may not solely depend on Trump or the outcome of the election, but these factors will certainly influence their pricing.

If Trump wins his second term, he is expected to take a much softer stance on cryptocurrencies compared to his first. He has quite possibly shocked the SEC by claiming that “the future of crypto and Bitcoin will be made in the United States” and “will support self-custody for the 50 million crypto holders in the country” back in May.

Dr. Orhon Can Dagtekin

Bitcoin’s unusual surge following assassination attempt

This makes the weekend’s events critical, as Bitcoin and many other cryptocurrencies experienced a price surge. Typically, when Bitcoin’s price converges with assets like gold and stocks (contrary to its creators’ original goal), it doesn’t see a spike in demand during times of uncertainty due to its inherent volatility.

This makes the incident unusual, as political uncertainty and a critical attack on a presidential candidate caused the opposite effect. From this perspective, the price movement could indicate support for Trump or his stance on these assets. Nevertheless, the short-term market reaction may not be enough to draw a definite conclusion.

What does future hold for bitcoin?

If Trump triumphs, it will most probably have a positive effect on Bitcoin and other cryptocurrencies in the short run. However, the key is still in the hands of the Federal Reserve (FED), which will decide whether an interest rate cut will benefit the economy, expected most likely by the end of the year.

A dovish FED in the future will mean money flowing into alternative assets globally, including cryptocurrencies. This may positively impact the whole market. Even Trump’s friendly stance may not be able to help Bitcoin if worries loom and interest rate cuts are not in sight toward the year’s end.

The fact that the chairman, Jerome Powell, was a Trump appointee during his first term is another interesting point worth underlining. However, like his attitude towards Bitcoin, Trump’s approach to the Federal Reserve also appears to be shifting, as his recent statements suggest that the central bank’s independence is in his crosshairs this time around.

Dr. Orhon Can Dagtekin

Time will tell if he succeeds in the upcoming election, but if he does and manages to reshape the economy as he sees fit, it is crystal clear Bitcoin will not be the only asset impacted.

Dr. Orhon Can Dagtekin is currently working as an assistant professor in the faculty of financial sciences at Ankara Haci Bayram Veli University. He received his undergraduate degree in Economics from Bilkent University, followed by a Master’s degree in Financial Engineering and Risk Management from the University of Essex. He obtained his Ph.D. in Economics from Gazi University. His research areas are focused on macroeconomics, monetary policy, cryptocurrencies, and artificial intelligence.