A Landslide Victory For Trump, Or Bitcoin?

Trump won against all odds and the system got its shock. Investors are sincerely spooked, pulling billions out of the markets as everyone looks for a safe haven. Bitcoin might be just what people needed, especially those who have limited or no access to financial products. Bitcoin has been steadily rising leading up to the election, showing the public that it is indeed a legitimate hedging tool. For those who paid heed to these trends in a timely fashion, nothing feels better than holding bitcoin right now.

Trump Wins, Bitcoin Gains

Investors generally look for safe havens that have a strong inverse correlation to political risk, in order to hedge their risks. There seems to be a correlation between some of the key events of the electoral campaign and the price of bitcoin over the last 10 days. The price of bitcoin effectively started to rise at a faster rate when FBI director James Comey communicated to congress that the bureau would investigate a new string of Clinton emails they found during an unrelated investigation. This correlation however, is not strong. Comey declared 3 days ago that those emails will not change earlier conclusions on Clinton’s investigation. By then, bitcoin prices had already fallen from a 30 day peak, and were moving upwards once more.

Bitcoin Prices Oblivious to Politics?

Bitcoin seems to be only weakly correlated with the imminence of political risks. This is clear from previous examples like Brexit; Trump’s electoral shock is reaffirming that. It is true that bitcoin prices advanced in some instances as political risk climbed, but there are a myriad of different reasons why this happened. Trends on BTC USD charts show that bitcoin was poised to rise regardless of the outcome in the election.

To Hedge with Bitcoin or not to Hedge…

Despite the weak correlation, bitcoin proved that it can be a safe haven in uncertain times. Most investors however, chose gold above bitcoin. It seems traditional safe havens will remain the most popular choice for the time to come, at least amongst those who have access to it. Those who cannot buy gold positions in the market, can definitely buy bitcoin. Mexican Peso holders could have profited from keeping a part of their funds stowed safely away in their cold bitcoin wallets. They could have done so without going through any traditional intermediary.

The Real Meaning of Trump’s Victory

This is why people should understand that although the correlation between the price of bitcoin and the imminence of political risk is not as strong as many would think, the cryptocurrecy remains a valid hedging tool. Grexit fears, Brexit and now Trump’s victory in the 2016 presidential elections, show as much. Moreover, bitcoin should definitely be the tool of choice for those who do not have access to investment banking. Everyone is exposed to these risks, but those who have less access to banking and financial products, are more vulnerable. They would have had the most to gain from buying a few coins when Trump was still unlikely to win.