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Bitcoin stands to gain from U.S. fiscal dominance, Trump victory: StanChart

According to Standard Chartered’s Geoff Kendrick, there is a growing risk of fiscal dominance in the U.S. due to increasing debt and deficits, which could be positive news for bitcoin (BTC-USD). Fiscal dominance occurs when government fiscal actions overshadow the independence of monetary policy, potentially impacting central banks’ ability to control inflation.

If Donald Trump were to win the presidential election, it could benefit digital assets as well. In a scenario of U.S. fiscal dominance, bitcoin could serve as a hedge against de-dollarization and declining confidence in the U.S. Treasury (UST) market. The price of bitcoin has a strong relationship with factors such as the widening yield spread between the 2-year bill and the 10-year note, inflation breakevens, and term premiums.

JPMorgan Chase CEO Jamie Dimon, a long-time bitcoin critic, also acknowledges the risks of fiscal dominance, noting that the U.S. economy’s growth is driven by government spending, which could lead to inflation. Bitcoin tends to perform well in times of banking system stress or central bank monetization of government debt.

Some argue that bitcoin is a good hedge against inflation, but there have been instances where the price did not react as expected to inflation readings. Kendrick predicts price targets for bitcoin to reach $150K by the end of 2024 and $200K by the end of 2025. Despite the Biden administration’s stricter stance on crypto, a Trump re-election could lead to looser regulation and the approval of U.S. spot ETFs.

Overall, bitcoin is currently trading at $61.3K, down 13% month-over-month, but up 45% year-to-date and 122% from a year ago. The average SA analyst rating for BTC is a Buy. It’s important to note that politics can intersect with financial news, so readers are encouraged to join the discussion on this topic.

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