• Trump trade becomes a new tailwind for cryptocurrencies

• Bitcoin surges to one-month high, briefly surpassing $66,000

• But is this a temporary boost, as bias turns neutral again?

An unexpected turn

With the US presidential campaign now well underway, it was only a matter of time before election fever would hit cryptocurrencies.  Many traders now see a victory for Donald Trump at the November election as a foregone conclusion. But in terms of surprises, what’s been more unpredictable for the crypto industry about the 2024 race isn’t so much President Biden’s crumbling campaign, but former President Trump’s seeming U-turn on digital currencies.

Back in 2019 when Trump was still in the White House, he famously tweeted that he is not a fan of Bitcoin nor any other cryptocurrency, alluding that their value is based on thin air. But a change of heart seemed to occur in late 2022 and by May this year, Trump completed his U-turn by announcing that his campaign will start accepting donations in cryptocurrencies, a first for a major presidential candidate in the United States.

Bitcoin bulls energized, but not in control yet

This has given rise to hopes that a second Trump administration would scale back Washington’s regulatory crackdown on the crypto industry, in a boon for digital assets. Following Trump’s failed assassination attempt on July 13 that boosted his chances of beating Biden, Bitcoin has gained by about 10%.

But the bounce back already appears to be losing steam and Bitcoin is seeking support around its 50-day moving average (MA) in the $63,750 area. A drop below it would likely see the $60,000 level being tested again. The significance of this support region is underscored by the fact that the 200-day MA is also in the vicinity. Breaching it would reinforce the medium-term bearish picture.

However, if Bitcoin manages to resume its rebound, it would need to stretch the gains all the way to the $72,000 mark near the June peak to give the bulls a fighting chance of reviving the longer-term uptrend.

Trump and Biden not the worst outcome

The bullish scenario could play out if investors become even more confident of a Trump victory closer to the election and this is something that would be positive for most risk assets as the former president favours lower taxes and less regulation. On the other hand, a Biden win would maintain the status quo so at worst, it would only lead to an unwinding of the Trump trade.

The bigger worry for Bitcoin and cryptocurrencies in general is if Biden were to drop out from the race and be replaced by the Democrats by someone who is less crypto friendly. Although the Biden administration has mostly supported increased regulation of cryptos, it also gave the green light to the first crypto ETFs in the US. Hence, the downside risk for Bitcoin from the presidential election has yet to be determined.