Important macro policy issues in the upcoming U.S. elections will include the size of government deficits and debt, inflation and Federal Reserve independence, and the United States' role in the world.

And Bitcoin is an alternative currency system that competes with the US dollar. U.S. government policies that affect the economy or the outlook for the U.S. dollar could also have an impact on Bitcoin. #美国大选 #比特币回调

The U.S. dollar is likely to lose value, and we believe Bitcoin could benefit from policy changes that could lead to:


(1) Increase in U.S. government debt

(2) The Fed’s independence is eroded and inflation risks increase

(3) The decline of U.S. leadership overseas.


With Bitcoin nearing all-time highs, candidates running for the 2024 elections are already weighing in on cryptocurrency market topics. Former President Trump, for example, said in an interview this week that Bitcoin had "gained a life" and that he allowed supporters to use it to purchase goods.


Ahead of the election, a survey conducted by Harris Poll on behalf of Grayscale suggested that cryptocurrency investors may be paying attention to candidates’ views on Bitcoin and any clues about possible crypto legislation in the next Congress.

But Bitcoin is also a macro asset: it is an alternative monetary system and a “store of value” that competes with the U.S. dollar.


Therefore, macroeconomic and geopolitical issues in the U.S. election, such as the amount of deficit spending and the U.S.’s role in the world, may affect demand for the largest cryptocurrency. Personally, I believe that an election result that increases the risk of dollar depreciation may be beneficial to Bitcoin in the medium term.

Macro Issue 1: Government Deficits and Debt

To a certain extent, rising government debt can have a negative impact on a country's currency. For the United States, which has a large economy and mature institutions, the risks faced by the U.S. dollar mainly come from the "twin deficit" mechanism. The theory is that because marginal demand for government bonds is likely to come from foreign investors, budget deficits and trade deficits tend to expand simultaneously.

About half of U.S. government debt is held by overseas investors, and federal budget deficits have historically led to widening trade deficits. Furthermore, for the country as a whole, the amount of international liabilities (that is, debts owed to foreigners) is much greater than the amount of international assets, with U.S. net liabilities now totaling 65% of GDP.

As the stock of federal debt is expected to increase significantly in the coming years, overseas investors may have more limited or no interest in U.S. government bonds and begin to move away from the U.S. dollar, possibly toward other alternatives such as Bitcoin.

Both Presidents Trump and Biden left behind records of rising government debt and procyclical budget deficits, although the pandemic has made interpreting both records more complicated. Before the pandemic, President Trump had caused public debt levels to rise and budget deficits to widen, even as unemployment fell.

Government analysts also estimate that the 2017 tax law will increase the budget deficit over the medium term. In the wake of the pandemic, President Biden has similarly governed at a time when the federal budget deficit has grown and unemployment remains at historically low levels.

Additionally, neither candidate has prioritized balancing the budget during their second term. President Trump has said he wants to enact additional tax cuts, while President Biden's green energy investment plan is expected to significantly expand the deficit.


With public debt likely to rise under either candidate, the more important consideration may be whether either party controls both the White House and Congress.​


Under current practice, the party with a simple majority in Congress can pass fiscal policy legislation, and both Presidents Trump and Biden enacted major legislation under unified governments at the start of their terms. Impact on Bitcoin: If one party controls both the White House and Congress, demand may rise because it will be easier to pass deficit-expanding legislation.


Macro Issue 2: Inflation and Fed Independence

Grayscale partnered with the Harris Poll to survey likely voters on their views on cryptocurrencies and the upcoming election. Strikingly, respondents said inflation is the country's most pressing problem.


We believe that Bitcoin can be viewed as a “store of value” asset that serves as a hedge against dollar depreciation – the erosion of purchasing power caused by inflation or nominal depreciation.​


One way the election could affect the risk of a weaker dollar is through its impact on the independence of the Federal Reserve.​

Academic research has found that independent central banks - those charged with maintaining low and stable inflation and free from day-to-day control by elected officials - are better able to achieve price stability. Actions to weaken central bank independence could therefore increase the likelihood of higher inflation and a weaker dollar in the medium term. Fed Chairman Jerome Powell's term expires in 2026, so the next president will have a chance to shape the institution.

Macro Question 3: America’s Role in the World

Outside the United States, many of the largest holders of U.S. dollars are foreign governments. For example, for most countries, the U.S. dollar accounts for the largest share of foreign exchange reserves (official holdings of foreign assets by governments).​

Therefore, international demand for U.S. dollars may be affected by economic and political factors. For example, countries with U.S. military bases typically hold more U.S. dollars in foreign exchange reserves.

Since demand for the U.S. dollar depends on politics and economics, actions by the next president to reduce U.S. geostrategic influence could weaken demand for the U.S. dollar, which in turn could open space for rival monetary systems such as Bitcoin.

President Trump has a more negative view of U.S. international commitments than President Biden, and his rhetoric and actions have occasionally caused friction with allies. Trump has frequently criticized NATO, withdrew the United States from the Trans-Pacific Partnership (TPP), imposed tariffs on a wide range of imports, including from Canada, Mexico and the European Union, and put pressure on Japan and South Korea.​

The Biden administration has provided more support to existing alliances and multilateral institutions. Examples include support for NATO and Ukraine funding (highlighted in his recent State of the Union address) and a more positive approach to the TPP.​

The Biden administration also abandoned major new tariffs. However, after Russia invaded Ukraine, the United States and its allies sanctioned the Russian central bank—perhaps the most important policy decision for the dollar’s ​​international role in recent years. This action led to the "de-dollarization" of the Russian economy - a shift away from the U.S. dollar and toward gold and other currencies. In the future, other countries facing the risk of sanctions may also try to diversify away from the dollar. Impact on Bitcoin: More isolationist policies or aggressive use of extraterritorial sanctions could weigh on the U.S. dollar and support alternatives like Bitcoin.

Bitcoin on the ballot

In addition to macro policy issues on the November ballot, cryptocurrency investors will also be watching for guidance from industry-specific legislation. Several pieces of encryption legislation were debated in the last Congress. These include two omnibus bills, the McHenry-Thompson Act and the Lummis-Gillibrand Act, both of which address registration requirements for crypto-asset exchanges and the SEC and CFTC’s jurisdiction over crypto-assets.

Two other important bills that cryptocurrency investors will be watching include the Stablecoin Act, which seeks to increase regulatory transparency around stablecoins, and the Digital Asset Anti-Money Laundering Act, which focuses on preventing illegal financial activities in cryptocurrencies.

Regardless of how the U.S. cryptocurrency regulatory environment evolves, the macroeconomic and geopolitical trends driving the U.S. dollar and Bitcoin higher appear likely to persist. We believe these trends include large government budget deficits and rising debt, rising and more volatile inflation, and declining trust in institutions. Bitcoin is another “store of value” competing with the U.S. dollar. If the long-term outlook for the U.S. economy and the U.S. dollar worsens, we expect demand for Bitcoin to rise.

For presidential elections, both candidates have served as president before, so investors can assess the impact of re-election in part from their previous statements and actions. Given the historical record, government debt will likely continue to rise if Trump or Biden also takes control of Congress. Despite the health of the U.S. economy, another large deficit could pose downside risks to the dollar. Likewise, any policy that increases the risk of inflation and/or reduces the demand for U.S. dollars from foreign governments could cause currency devaluation and could benefit the U.S. dollar's competitors (such as other national currencies, precious metals, and Bitcoin)

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