Asset manager Bryan Courchesne believes that Bitcoin could become a strategic reserve asset for the US under a future Trump administration by using the Department of Justice’s 200,000 BTC holdings. Former President Trump’s pro-crypto stance and the selection of JD Vance as his running mate have fueled speculation about Bitcoin’s integration into the financial system. Meanwhile, Bitcoin’s recent price surge is also linked to market expectations of a weakening US dollar under a potential Republican administration, and China’s interest rate cuts are also boosting Bitcoin’s rally, with traders predicting new all-time highs if key support levels hold.
Bitcoin Could Become a Key Reserve Asset for the US
Asset manager Bryan Courchesne recently appeared on CNBC to talk about the potential for Bitcoin to become a strategic reserve asset of the United States government under a future Trump administration. According to Courchesne, adopting Bitcoin as a reserve asset would be challenging but not impossible.
He pointed out the Department of Justice’s large holdings of 200,000 BTC, which positions the US government as the largest holder of Bitcoin after its pseudonymous creator, Satoshi Nakamoto. Courchesne suggested that transferring these Bitcoin holdings to the United States Department of the Treasury could pave the way for the Treasury to start accumulating and holding Bitcoin long-term.
The speculation about Bitcoin becoming a global reserve asset or a strategic US Treasury asset gained some momentum after former President Donald Trump’s endorsement of the digital asset industry amid rising global debt and inflation. Trump’s selection of pro-crypto JD Vance as his running mate also fueled speculation that a future Trump administration might fully integrate Bitcoin into the existing financial system.
Billionaire investor Mark Cuban has also envisioned a scenario where widespread inflation and geopolitical instability drive the global population to Bitcoin as a haven to protect their savings and purchasing power. This shift could potentially elevate Bitcoin to the status of a global reserve currency. In fact, data from high-inflation countries like Argentina, Venezuela, and Turkey already shows populations turning to cryptocurrencies as a hedge against inflation.
However, not everyone shares this optimistic view. Ari Paul, the founder of BlockTower Capital, believes the odds are 10:1 against Bitcoin becoming a strategic reserve asset of the United States in the next four years. Paul believes that even if a future president announces that the US would not sell its Bitcoin holdings, the establishment of an official US strategic reserve may still be unlikely.
Bitcoin’s Price Linked to US Dollar, Not Just Politics
Bitcoin’s recent price surge may be less about speculation over the United States elections and more about market expectations of a weakening US dollar. According to a July 22 analysis by crypto custodian Copper, the increasing likelihood of former US President Donald Trump winning a second term in the November elections has led to a rally in crypto prices.
However, the movement could also be tied to market expectations that the US dollar will lose ground against other currencies, as it has historically under a Republican White House. Bitcoin’s price has rallied more than 4% in the past seven days, jumping from roughly $63,500 on July 15 to around $67,540 at the time of writing, according to CoinMarketCap.
The report points out that Bitcoin’s market behavior often mirrors that of other major fiat currencies, which rally when the US Dollar Index (DXY) declines. This trend was very noticeable in 2017 and 2021 when BTC reached all-time highs as the dollar weakened.
The US dollar has decreased by 10% on average during periods when a Republican president has been in office since 1969, indicating a weaker US dollar relative to other major currencies. On the other hand, the dollar has increased by 8% on average during periods when a Democratic president has been in office since 1969.
Fadi Aboualfa, Copper’s head of research, shared that Bitcoin’s dynamics are a bit more complex as it has a tendency to move in the opposite direction of the US dollar’s strength or weakness. Additionally, any administration that delivers growth would likely see investors returning to more volatile asset classes.
According to Copper’s analysis, it’s not the absolute strength of the DXY that matters but rather market expectations about its future performance. Should markets continue to anticipate a Republican win this year, there might be an assumption of potential for the US dollar to weaken, especially considering it is currently trading at its highest level since 2002.
DXY Index changes under different administrations (Source: Copper)
Between 2013 and 2016, during President Barack Obama’s Democratic administration, the DXY rose by 25%. This increase can be attributed to several factors, including the economic recovery after the 2008 financial crisis, overall improved economic conditions in the US compared to other major economies, and growing expectations that the Federal Reserve would eventually begin hiking interest rates.
In contrast, between 2017 and 2020, under the Republican administration of Trump, the DXY declined by 7%. This time saw big tax cuts, which initially boosted economic growth but also led to concerns about rising fiscal deficits. Trade tensions and tariffs imposed on other countries also contributed to a more volatile dollar.
Since 2021, under the Biden administration, the DXY has increased by 14%, according to Copper’s analysis. A combination of factors like higher inflation expectations, the Federal Reserve’s actions to combat inflation by raising interest rates, and global uncertainties have contributed to the rise of the greenback over the past few years.
China’s Rate Cuts Boost Bitcoin Rally
Although a Trump administration and the possibilities for Bitcoin becoming a US strategic reserve asset could boost the price of BTC, there are some other factors that could also boost the price of the crypto king.
Bitcoin aimed for $68,000 at the July 22 Wall Street open as a Chinese interest rate cut added to bullish crypto catalysts. The upward move came after mixed performances from Asian stocks as China cut several key interest rates. The People’s Bank of China (PBoC) confirmed that it would cut the seven-day reverse repo rate by 0.1% to 1.7%, while the one-year and five-year loan prime rate (LPR) followed suit.
Larry Hu, chief China economist at Macquarie Group, acknowledged that the cut was very unexpected, and likely due to a sharp slowdown in growth momentum in the second quarter. Markets commentator Holger Zschaepitz pointed out that it has been almost a year since the last Chinese rate cut, with the Chinese stock market not reacting enthusiastically.
Global interest rates heading lower is a key ingredient for risk asset performance, including crypto. The United States still has to follow China and Europe in beginning a rate-cut cycle, but markets expect this to begin in September.
Bitcoin traders have been seriously discussing the potential for all-time highs. Popular trader and analyst Rekt Capital stated that Bitcoin had canceled out almost the entirety of a recent 25.6% retrace within two weeks. An accompanying chart compared recent BTC price behavior to other retracements, which led Rekt Capital to reiterate the case for new all-time highs in September.
Michaël van de Poppe, the founder and CEO of trading firm MNTrading, flagged $65,000 as an important level to hold as support, with the range lows at around $61,000 as the next line of defense. He predicted that if $65,000 holds this week, continuation toward the all-time high should be expected.
This article was originally Posted on Coinpaper.com
