With the US Election set to take place in November 2024, there may be an opportunity to increase allocation to crypto, with the digital asset space strengthening due to Donald Trump’s electoral push.
In recent weeks, there has been a downward trend in the 30-day correlation coefficient between Bitcoin and the MSCI All Country World Equity Index (MSCI ACWI), turning negative. The correlation between the two has been strongly positive since 2019, with the measure turning negative only several times. This can be attributed to the increasingly crypto friendly stance adopted by the Republican party.
With Trump’s recent surge in polling, Bitcoin and other digital assets may be set for an increasingly supportive regulatory backdrop. Trump has pledged to promote increased Bitcoin mining in the US.
As of the 24th of July, Bitcoin is up 9% in July, compared to the MSCI ACWI which marginally increased by 2%. This period has coincided with Trump’s increased polling figures through securing the Republican nomination, first presidential candidate debate and recent assassination attempt.
Furthermore, just as the US dollar has fallen Trump’s electoral chances have increased. This can be a catalyst to increased allocation to alternative assets, buoying the optimism around further cryptocurrency growth. The continuation of easier access to crypto investments, as seen by $60bn inflow into spot Bitcoin ETF’s, can be a new avenue for first time crypto investors. Even though Bitcoin has rallied 50% year to date, prospects of a weaker US Dollar, increased approvals of spot crypto ETF’s and the support of the Republican Party may drive crypto assets higher.
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The MSCI ACWI Indexis a free float‐adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWIconsists of 46 country indexes comprising 23 developed and 23 emerging market country indexes.
The Bloomberg Dollar Spot Index tracks the performance of a basket of leading global currencies versus the U.S. dollar. The index represents both developed and emerging market currencies that have the highest liquidity in the currency markets and the biggest trade flows with the U.S. Through its dynamically updated composition and its diversified representation of a breadth of currencies that are important from trade and liquidity perspectives.
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Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.
Purchasing cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
