According to new insights from Copper, Bitcoin's price is mainly correlated to the strength of the U.S. dollar, not political events.
The U.S. dollar tends to weaken when Republicans are in power and strengthen when Democrats are in power.
Copper also says that Bitcoin's price often moves inversely to the U.S. dollar.
There's a historical correlation between the U.S. dollar's performance and the political party in power.
While there might be short-term fluctuations due to political events, Bitcoin's long-term price trend is more tied to the strength of the U.S. dollar.
For months now, the U.S. political landscape has been divided on the issue of crypto.
Is a politician for or against the crypto industry? If so, what will happen to crypto if they win?
"Biden/Harris versus Trump"—"Deaton versus Warren"—"pro-crypto versus anti-crypto"
More than the speculation about how the price of this or that crypto might react if this or that politician wins…
What if there was no correlation between politics and the price of, say, Bitcoin?
According to insights from Copper in a recent report, crypto prices are largely related to another entirely different factor—and "Trump versus Biden" has nothing to do with it.
Crypto custodian Copper released a report on Linkedin this week detailing its insights on issues like the recent Ethereum ETF launches and Bitcoin's performance in the ETF market.
In the report, Copper maintained that the price of Bitcoin is largely correlated to the strength (or weakness of the U.S. dollar).
Surprisingly, this correlation between Bitcoin's price and the dollar has nothing to do with election speculation and more with how the two have behaved in the past.
But hold on.
We HAVE seen a correlation between Bitcoin’s price and electoral events.
For example, Bitcoin has generally performed better since Trump's pro-crypto campaign and the increasing mentions of crypto in U.S. politics.
We also saw a “coincidental” boom in the crypto (particularly the memecoin) market after the failed assassination attempt on Trump only a few weeks ago.
We saw another crypto boom when Biden stepped down on 21 July, among other political events before and after then.
So what does Copper mean?
Copper reports that the market often expects the U.S. dollar to weaken when a Republican (like Trump) takes office.
This weakness in the U.S. dollar leads to a Bitcoin boom—In essence, crypto prices often respond to the "strength of the U.S. dollar, " not specific political events.
Furthermore, Copper reports that Bitcoin's behaviour regularly follows that of other major fiat currencies.
When they decline, Bitcoin rallies.
As an example, Copper highlights the 2017 and 2021 scenarios, when BTC reached its all-time high as the dollar weakened.
In addition, Copper also reports that since 1969, the dollar has displayed a remarkable correlation to the party in power.
DXY index change under party
When Republicans take office, the dollar weakens by around 10% on average.
Conversely, when democrats take power, the dollar charges by 8% on average.
Take the 2013 - 2016 era, for example, when Barack Obama was in power.
Copper highlighted that the DXY (the dollar index) rose by around 25%, based on factors like economic recovery and expectations of interest rate hikes.
Average change under party
When Donald Trump took power between 2017 and 2020, the DXY fell by around 7% based on tax cuts boosting growth but raising concerns about fiscal deficits.
Biden took power in 2021, and the DXY has risen again by around 14% since then, based on factors like higher inflation expectations and interest rate hikes.
Copper’s insights hold a few truths.
If the market sees Trump win this year, the dollar might weaken, which is bad news for the U.S. economy but good news for crypto.
If Kamala Harris (or another Democrat) wins, the dollar could strengthen further, leading to lower crypto prices and strengthening the assumption that political/election speculation has a direct effect on crypto as a whole.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.