After Trump authorizes Biden's transition, can Bitcoin successfully hit $20,000?

Bitcoin is retesting its all-time high near $20,000, as Donald Trump yesterday approved his administration to work with President-elect Biden’s transition team.

The flagship cryptocurrency BTC rose cautiously on Tuesday, hours after General Services Administration Administrator Emily Murphy told Mr. Biden that Trump had approved the government's formal transition process.

The statement came after Michigan certified its election results, finding no evidence of significant voter fraud, as Mr. Trump said.

Bitcoin continues to thrive

As of 07:55 UTC, bitcoin was up 0.17% against the dollar, in line with U.S. stock futures, which also climbed in pre-market trading on Tuesday. For example, futures tied to the benchmark S&P 500 index rose 0.6% ahead of the London open, with Asian stocks similarly surging.

Markets expressed unease after current U.S. Treasury Secretary Steven Mnuchin refused to extend support for the Federal Reserve's emergency lending facilities. Analysts pointed out that Mr. Trump used his human resources tools to limit the Biden administration's power to address the economic impact in the United States.

And Bitcoin remains one of the biggest beneficiaries of the Fed’s lending programs.

Central banks have printed about 20% of the U.S. dollar bills in 2020 alone. Bitcoin, on the other hand, has an inherent economic policy that does the opposite, cutting its supply in half every four years.

Fears of inflation, coupled with negative-yielding debt, have driven investors toward scarcer alternatives like Bitcoin. The cryptocurrency rallied more than 350% after the Federal Reserve announced its expansionary plans. The Trump administration’s attempts to end much of the aid have hurt Bitcoin’s prospects for further gains.

The GSA statement relieved a pressing source of uncertainty among investors about a smooth handover of the White House to Mr Biden, with Robert Rennie, head of markets strategy at Westpac, telling the Financial Times that the transition would limit the impact of Mnuchin’s decision.

Stimulus package

Mr. Biden’s clear transition further paves the way for a long-awaited coronavirus relief package.

The president-elect has earlier promised to increase government spending to combat rising unemployment and deal with infections from COVID-19. If Democrats win majorities in both the Senate and Congress, a second stimulus package will face no political resistance.

Retailers and institutional investors (PayPal) have increased their investments in Bitcoin, but the prospect is similar, with more stimulus reducing the purchasing power of the dollar. This has led more people to turn to the safety of scarce assets like Bitcoin, said Alex Mashinsky of Celsius Network.

“People have to understand that bond market returns are bleak and they carry a lot of risk,” he said. “Buying into the stock market at all-time highs during a pandemic and a recession doesn’t sound like a very appealing proposition.”

This, to some extent, proves why Bitcoin will retest $20,000 by the end of this year or the first quarter of 2021.