What Biden’s Exit Means for Crypto

Well, there goes Joe Biden…

For the first time since 1968, when a Vietnam-war-besieged Lyndon Johnson declined to seek re-election, a sitting president has dropped out of the race for the White House.

Before I go on, let me assure you that this is not a political dispatch. It’s a bitcoin and crypto dispatch.

See, the upcoming presidential election is the first in history in which cryptocurrency is a major topic. Thus, Joe Biden sitting this one out has implications for crypto.

To be sure, crypto is second fiddle to far more substantive issues on the ballot, including the future of democracy, women’s rights, the role of religion in public life and government institutions, and many more that rip at America’s social and political fabric.

Nevertheless, Donald Trump has made crypto into a serious talking point in this election. Indeed, Trump just recently announced that as Prez #47, he would look to establish a US bitcoin strategic reserve fund, much like America’s strategic petroleum reserve. Plus, he’ll be a keynote speaker at the upcoming Bitcoin 2024 conference

He is clearly positioning himself as a champion of crypto to woo younger voters heavily invested in crypto’s success.

And given that my Global Intelligence service and Field Notes both cover crypto deeply, what happens with bitcoin, Ethereum, and other cryptocurrencies at the highest level of government definitely trickles down into our world.

So it is, then, that I offer up my scorecard on what Trump and Biden’s replacement will mean for crypto and, ultimately, the economy, since economic issues often have a major impact the crypto market.

Frankly, at this point, Trump seems likely to retake the White House, largely because of the Democrats’ mistake in running an octogenarian in clear decline as their candidate. Though Biden dropped out of the race on Sunday, his likely replacements all underperform Trump in polling—except for Michelle Obama, who polling says would trounce Trump.

However, Obama has no known history with crypto (and no known interest in the White House). Her #1 advisor, her husband, former president Barack Obama, has not said much about bitcoin other than likening it to “everybody walking around with a Swiss bank account in their pocket”—and I am not convinced he said that in a way that’s supportive of crypto.

Current Veep Kamala Harris’ position on crypto is a mystery, as well, but her boss, Joe Biden, has been trying to make inroads with the crypto community in the wake of the crypto community and tech billionaires throwing their combined weight behind pro-crypto Trump. Hard to say if a President Harris would follow that same path. But given her background as a politician repping Silicon Vally, she has proven to be one of the most pro-tech lawmakers, so that might be good news for crypto ultimately.

As for Trump, his positions on crypto and the economy are widely known.

As I noted up top, Trump has begun pushing an idea to include bitcoin as a strategic reserve asset. On the face of it, that’s bullish, and bitcoin has rallied as a result. The US owns about 213,000 BTC collected through asset seizures over the years, so that would be decent seed capital for a reserve fund.

However, Trump wouldn’t have unilateral authority here. He’d need buy-in from Congress, the Federal Reserve, Treasury, and others. The likelihood of that happening is slim… although, if Trump follows through with his announced plans to fire 50,000 civil servants and replace them with sycophants loyal only to his agenda, then maybe he pulls it off.

Elsewhere, Trump would certainly clear out crypto obstructionists in the Securities and Exchange Commission, and very likely replace Jerome Powell at the Federal Reserve and Janet Yellen at Treasury. Those moves would be hugely beneficial to crypto, particularly dumping SEC head Gary Gensler, who has single-handedly caused trillions of dollars in crypto losses because of his wrongheaded and pernicious views on crypto.

Trump’s real impact on crypto, however, will very likely come from his economic policies—and for crypto, that’s a mixed bag.

First are his proposed tax cuts.

Those are inflationary.

Tax cuts mean more money in the economy chasing basically the same amount of goods. This would also increase America’s already-extreme levels of debt. Fewer tax dollars flowing into government coffers will require the US to sell more Treasury paper to fund the government. (And, for the record: Tax cuts do not trickle down into greater economic activity and, thus, a larger tax haul. Plenty of impartial research his disproven that fallacy.)

Next is Trump’s plan for tariffs of 60% on China-made goods and 10% on every other import. That is massively inflationary, as well.

Foreign manufacturers don’t pay the tariff—American consumers do.

Moreover, because imports would cost more, US manufacturers of the same or similar products would have cover to raise their prices as well.

In short: Tariffs would be massively inflationary on the US economy, which has implications for crypto.

In theory, the Federal Reserve would react to inflation by raising interest rates, which has proven extremely bearish for crypto. But if Trump replaces Fed Chair Powell with a “yes man” who bows to Trump’s oft-stated love of low interest rates, then America will be stuck in a high-inflation, low-rate environment that will destroy the US dollar—good for crypto on the surface.

In fact, Trump and his vice-presidential running mate, JD Vance, have started sounding off about wanting a weak dollar, which in theory might bolster US exports (by making US goods cheaper abroad). But by raising tariffs at the same time, Trump would invite a trade war with the rest of the world that would see numerous countries slap tit-for-tat tariffs on US goods as well, thereby canceling any benefit that might come from a weaker dollar.

All of that is extremely bad news for the US economy and American consumers, though as I said, it’s a mixed bag for bitcoin/crypto.

Despite Trump’s lust for low rates, high inflation would ultimately force even a sycophantic Fed to raise rates at some point and likely quite sharply. That would be bad news for crypto. The Fed rapidly pushing rates to 5.5% from less than 1% in the post-COVID inflationary era fueled crypto’s most-recent bear market.

Then again, an ever-weakening dollar and growing fears at home and globally of a fiscal/debt crisis in America would act as tailwinds for bitcoin and crypto. Bitcoin, in particular, would be seen as a safe haven asset as the dollar’s purchasing power sinks.

So those are the trade-offs crypto-aware voters must consider at the ballot box in November.

Is the destruction of the US dollar, rapidly increasing inflation, and the hastening of America’s fiscal decline worth a higher bitcoin price?

And will the factors that push crypto prices higher be enough to match or outpace the decline in consumer purchasing power as inflation rages and the dollar shrivels?

Hard to answer those questions, for sure.

But I remain bullish on bitcoin and crypto. No matter who claims the Oval Office in January 2025, the fact remains that America’s fiscal goose is cooked.

If a Democrat wins, we’re going to see extreme spending continue on debt-forgiveness, free college, and other social engineering efforts.

And if Trump wins, we’re going to see higher inflation from his economic policies, a weaker dollar, and very likely a trade war.

In the end, both parties will push America’s debt rapidly higher and hasten the dollar’s decline.

Which just means you want to own bitcoin for the long haul and grit your teeth through the violent ups and downs.