While the market meltdown some feared following a Donald Trump win in the presidential election hasn't taken place — the major US indices are hovering down less than 1 percent this morning — one currency has seen a major bounce since it became clear last night that Trump was likely to be the country's next President:
The seven-year-old cryptocurrency shot up $30 to $738 per BTC, before settling back down around $722, where it sits right now. That's up nearly 2 percent today. The reason? According to Chris Burniske, blockhain products lead at the investment house ARK Invest, money floods to bitcoin in times of market instability.
"In many ways, people are treating it as gold 2.0," Burniske said. "Time and again over the past year, whether it was during the yuan devaluation or Brexit, whenever we have these shocks to capital markets, you see people turning to Bitcoin. It's a disaster hedge."
Bitcoin is relatively small. Its market cap — around 11.5 billion dollars — makes it slightly less valuable than Twitter. It's largely free from capital controls, and is driven by an independent group of investors from around the world. According to Burniske, these factors leave the currency uncorrelated with other capital markets. In other words, it's an attractive asset to buy when larger global assets are volatile. (It's worth noting that the price of gold is also up more than a percentage point today.)
While many previous Bitcoin spikes have been driven by investment from China, the money flowing into the cryptocurrency last night and today seems to be coming from US-based investors. According to Burniske, the volume on the five biggest Bitcoin-US Dollar exchanges is triple today what it was Monday.
What a Trump presidency will mean for bitcoin and cryptocurrencies in general is unclear. The policies section of the Trump/Pence website makes no mention of digital currencies. But if Trump governs with the capriciousness that he campaigned, it stands to reason that the markets could follow. And that will ultimately be good for whatever asset is most insulated from that volatility.
And today, that seems to be bitcoin.