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Writer's pictureJames McKay

Trump's victory: market reactions and the emerging role of bitcoin




The 2024 US Presidential election culminated in one of the most dramatic and historic political comebacks in American history. Donald J. Trump’s victory not only reclaimed the Presidency for the Republican Party but also signaled a shift in political and economic sentiment.


From surging futures in traditional markets to bitcoin returning to price discovery mode, the aftermath of the election has been characterised by volatility, optimism, and a reconfiguration of investor expectations. In this piece we'll recap the immediate market reaction and look at the implications for the global economy, bitcoin, and the broader digital assets space.


Trump’s victory and the market’s enthusiastic response


Trump’s election victory marked the first time in 20 years a Republican candidate won the popular vote, signaling widespread voter support. The sweeping victories in the Senate and House further solidified his mandate for policy change and eliminated any potential allegations of election impropriety.


Figure 1: Equities reacted favourably to Trump's resounding victory

Source: AP; FactSet

Unsurprisingly, the market reaction was immediate: broad indices surged in the hours following the election results, with the Dow, S&P 500, and Nasdaq, climbing 4.0%, 3.5% and 3.0% respectively. This rally reflected investor optimism over the prospects of pro-growth fiscal policies under a Trump administration.


Central to this positive sentiment is the expectation of reduced regulatory hurdles for US-based businesses and investors are anticipating that Trump’s policies will shift reliance away from monetary policy to spur growth through infrastructure spending, tax cuts, and business-friendly legislation.



Bitcoin’s historic rally and its growing political relevance


Bitcoin’s reaction to the election was everything but a sell the news event as some had predicted, with the premier cryptocurrency surpassing $75,000 for the first time fuelled by investor confidence in Trump’s perceived pro-crypto stance. It's no secret that the cryptocurrency community largely supported Trump during the election, citing his regulatory-friendly posture compared to the Harris campaign, which had struggled to shed its anti-crypto reputation.


Bitcoin's rally was not limited to election day and it continued to rise for six consecutive days and recorded its biggest-ever daily increase on November 11 where it gained $8,343, a huge 10.4% rise. The premiere digital asset has since gone on to test the $100K level, recording it's all-time high of $99,645 on November 22.


Bitcoin’s rally also underscored its increasing relevance as a hedge against political and economic instability as trust in traditional financial systems continues to erode, offering an alternative to fiat currencies in a the current period of persistent inflation and government overreach.


Zooming out, we can see that bitcoin has consistently appreciated over four-year election cycles, with diminishing but stable returns. Figure 2 shows price behavior in each of the previous election cycles and predicts a possible top for the current cycle based on the diminishing returns experienced in the three cycles prior.


Figure 2: Bitcoin's price behavior across previous US administrations

Source: McKayResearch

We can make the following observations:


1️⃣ The price of BTC has never decreased from one election day to the following election day four years later


2️⃣ Further to point 1, the price of BTC has never returned to or fallen below the price floor set on election day at any time between election cycles


3️⃣ There has been substantial price appreciation decay between election day and BTC cycle peaks, ranging from +10,473% to 'only' +363% for the previous cycle


4️⃣ For each of the election cycles shown, the average time taken from election day to cycle peak is 388 days, so just over a year


5️⃣ It appears unlikely that the next four years will buck the trend, given BTC experienced a macro bear market for the first time under Biden (COVID/Ukraine)


6️⃣ When exclusively using the exponential decay of price appreciation and average number of days from election day to cycle peak as a predictive model, we arrive at a price of $182,226 for the next cycle top which will be reached around the 28th of November 2025.


So we can see that by using trend data from previous election cycles, bitcoin is likely to continue its current trajectory to reach prices in line with the most prominent price predictions of major market participants ($150K-$200K range).


Gold, bitcoin, and the evolving narrative of safe havens


While Bitcoin soared, traditional safe havens like gold and silver faced initial declines. This reaction reflects the complex and evolving nature of investor sentiment. In the immediate aftermath of Trump’s victory, investors appeared more inclined to shift capital into growth-oriented assets, reflecting optimism about economic stability under his administration.


Figure 3: The divergent market reaction immediately following Trump's election victory

Source: McKayResearch


However, the structural factors that propelled gold and Bitcoin to prominence in 2024 such as unsustainable debt levels, geopolitical risks, inflation, and others, remain unaltered:


Bitcoin’s role in this evolving narrative is particularly intriguing. Its positioning as “digital gold” suggests a tightening correlation with precious metals, yet its unique attributes—decentralisation, transparency, and limited supply—distinguish it as a hedge against political and economic instability in its own right. Here, BlackRock's acknowledgement of bitcoin as a bonafide hedge against fiscal and geopolitical risk cannot be underestimated as a source of short-term and long-term demand.



Conclusion: a pivotal moment in economic and political history


There's no question that the 2024 US presidential election marks a watershed moment, not just for American politics but for the global economy and financial markets.


Yes, while the market reaction since the election has been positive by and large, it's particularly symbolic for bitcoin and digital assets for several key reasons. Specifically, the election of Trump signals the first ostensibly pro-crypto administration, and plans to initiate a strategic bitcoin reserve will have a huge potential impact on the supply/demand equation.


Further, Trump's pledge to bring about a 'dovish' shift at the SEC will go some way to address regulatory clarity issues that have held back both institutional and retail participation in digital assets. This will pave the way for accelerated adoption and a smoother path to regulatory compliance for US-based blockchain firms.


Hester Peirce, in particular, has voiced strong opinions against overreach in crypto enforcement, signaling a desire for regulatory frameworks that both protect investors and promote growth.


Finally, as bitcoin gets more deeply entrenched into the political fabric, perhaps now is as good a time as any to remember that one of its central tenets serves as a direct critique of fiscal and monetary policies that have led to currency debasement and economic instability. By holding it, individuals are essentially opting out of the increasingly crumbling fiat systems and expressing a preference (and need for the less fortunate) for an alternative that limits inflationary risks and preserves value over time.


 

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Disclaimer: The information contained within is for educational and informational purposes ONLY. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision. No commercial relationships or partnerships exist with any of the technology providers, manufacturers, or suppliers herein.

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