The US election is less than two months away. Lecker Capital's Quinn Thompson said bitcoin was the best crypto asset ahead of the vote.
Bitcoin is the best crypto asset to buy until the US elects a new president.
That's according to Quinn Thompson, founder of Lecker Capital, a hedge fund that specializes in using macroeconomics to invest in crypto.
“Out of the universe of tokens, bitcoin has both the most obvious upside potential and the least downside,” Thompson said. News.
In general, Bitcoin is less volatile than its peers, and this cuts both ways. If Bitcoin goes up, other cryptocurrencies like Ether or Solana go up even more — and if Bitcoin goes down, those other coins go down even more.
But it has been a very unusual year for the crypto markets.
Fundamentals have improved significantly – Bitcoin and Ethereum now have spot exchange-traded funds, US politicians from both sides of the aisle are courting the industry, and the Federal Reserve has announced its long-overdue interest rate cut.
However, Bitcoin remains at the same price as in February at $56,400. Solana, the cycle's greatest comeback story, drifted at $135. Ether is only up 2.2% since January 1st.
Supply issues have created headwinds for Bitcoin and the rest of the crypto market. The US and German government dumped their holdings, bankrupt crypto firms redeemed ETF shares, and bitcoin miners sold off some of their bitcoin stash after their income was cut in half.
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For Thompson, investors probably aren't paying enough attention to fundamentals, which wasn't great during Bitcoin's run-up earlier in the year. And they are making the same mistake now that the macro conditions are better.
“Crypto is such a momentum-driven asset class,” Thompson said. “We always overshoot in both directions because of leverage, speculation and pursuit of momentum.”
Inflation is back
When it comes to bitcoin, Thompson favors the asset because no matter who wins in November, the US government is unlikely to cut spending anytime soon.
The Congressional Budget Office predicts that the US budget deficit will rise 18% next year to $2 trillion. reported In July.
Spending priorities include student loan relief, health care, addressing banking failures, as well as military aid to Ukraine and Israel.
The government makes up that deficit by issuing more debt in the form of US Treasury bills. But if there isn't enough demand for them — from countries like Japan and China — the Federal Reserve ends up printing money and buying government debt, leading to inflation.
This is where Bitcoin comes in. Because it is designed to last only 21 million bitcoins, the top cryptocurrency is often seen by investors as a hedge against currency declines.
Government spending “will put a floor on future inflation and boost bitcoin and gold prices over the medium to long-term horizons,” Thompson said.
The Federal Reserve is on the brink of cutting rates — which would make borrowing money cheaper and increase liquidity in the economy — probably won't help either.
“I think inflation will become problematic again, and that will eventually cause the Fed to stop cutting,” Thompson said. “But based on their last hiking cycle, they are waiting as long as possible to raise rates again because of inflation.”
Trump's winning factor
Bitcoin will also gain heavily if former President Donald Trump gets another term in office.
Historically crypto-agnostic, Trump began making announcements to the crypto industry in May.
Since then, he has promised to create a Bitcoin strategic reserve, met with Bitcoin mining executives and appeared at the Bitcoin Conference in Nashville, Tennessee, the biggest crypto event of the year.
While Trump's victory is good news for the crypto industry as a whole, Thompson notes that much of his rhetoric has focused on Bitcoin.
“If Trump wins, there will be many digital assets that outperform Bitcoin, but I see less appetite for market players to speculate on early election results due to high uncertainty,” Thompson said.
The wildly successful spot bitcoin ETFs launched in January also leverage calculus.
“Bitcoin will benefit from huge inflows if Trump wins,” Thompson said. “But it's already the most accepted and accepted digital asset from a regulatory perspective, so if Trump doesn't win, it's not the end of the world for Bitcoin.”
Tom Carreras writes about markets for DL News. Got a tip about Bitcoin and the election? arrive at [email protected]
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