Robert F. Kennedy Jr. (RFK Jr.) has been in the news for several reasons, ranging from his position on cryptocurrencies, the US financial system, and other issues touching the US and global political scenes. But perhaps the most important opinion of RFK Jr. to financial market traders is his decision to run for the US presidency in 2024 under the Democratic Party.
Traders and investors are deeply interested in RFK Jr.’s currency plan to switch to a Bitcoin-backed currency, where the country embraces Bitcoin and adopts cryptocurrency for trade and investments. While RFK Jr. is not the first to make such calls, his growing acceptance and support among the crypto community makes it important for traders looking to track fundamental news.
The Monetary System and the Concept of Currency Backing
Keeping up with economic news can be easy — especially on platforms like MetaTrader 5, which has a news hub where you can get a feel for traders’ sentiments on important issues like RFK Jr.’s proposals. But, in case you need a refresher, we’ve broken down everything you should know about RFK Jr.'s currency plan.
The US Dollar is currently one of a few global currencies and not backed by physical commodities such as gold. But it has not always been so; physical gold deposits once backed the USD, thanks to the Gold Standard. The USD was initially pegged to the price of gold and became the international standard for valuing currencies.
But as the world moved away from the Gold Standard, the US Dollar also grew in status to become the world’s biggest reserve currency. Soon, a new system, the Bretton Woods System, was agreed on to replace the Gold Standard. This quickly became successful because the USD was itself linked to gold. Today, many countries have their external reserves in USD, and several use currencies tied to the USD or the USD in their countries.
Although the US holds the world’s largest gold reserves, the value of the USD itself is no longer dependent on the price of gold but also on local and global demand. This makes the USD susceptible to fundamental factors that affect its exchange rate: demand, inflation, economic performance, trade balances, and geopolitical events.
RFK’s Proposed Bitcoin-Backed US Dollar
RFK Jr. calls for the US to switch to a Bitcoin backing, tying the USD to Bitcoin and effectively embracing cryptocurrency for financial activities. RFK Jr. has repeatedly made this call and is a popular proponent of adopting Bitcoin. On several occasions, he has explained his interest in Bitcoin began in 2020 during the lockdown and has recently declared some Bitcoin holdings.
RFK Jr.'s proposal for a commodity-backed USD also includes backing with hard precious metals such as hard currencies like gold, silver, and platinum. RFK Jr. believes that backing the USD with these "hard currencies," as he refers to them, would stimulate economic recovery and help the US regain a stronger financial stand. Whether or not that could happen, The Democratic Party candidate is fast gaining support among Bitcoin enthusiasts and the crypto trading community, especially on X (formerly Twitter).
To achieve this, RFK Jr. proposes a few changes to help Bitcoin holders and the economy, with the first being capital gains exemption.
Exemption of Bitcoin from Capital Gains Tax
Crypto capital gain tax is the mandatory tax that investors, traders, and any individual or group must pay on profits from selling a capital asset. Capital gains tax applies to cryptocurrencies in India, the US, and many other countries. For example, investors pay up to 30% tax on short-term capital gains and between 0% and 20% on long-term capital gains taxes on cryptocurrencies.
Capital gains are important to traders as they impact the final profit they can realize from their portfolio. But RFK Jr. is proposing an end to capital gains taxes on Bitcoin if he becomes president, making Bitcoin the backing asset for the USD. Excluding Bitcoin assets from gains, taxation will increase the demand and reduce investment costs.
Traders may find opportunities in this potential development. For instance, any announcement to remove capital gains taxes on Bitcoin will impact the market favorably, as the increased demand will drive the price up and increase the value of Bitcoin investments. Similarly, increasing the tax may cause a price dump immediately as investors seek to sell off their Bitcoin assets.
Global Adoption of Bitcoin
RFK Jr.'s currency plan will place the US alongside countries like El Salvador that adopted Bitcoin as a currency. A global adoption of Bitcoin could see its price rise to higher levels, increasing the value held by RFK Jr. and other Bitcoin investors. It is important to note that Bitcoin's inherent volatility is the most significant global adoption issue.
RFK Jr. has also commented on the control that Bitcoin offers users, arguing that Bitcoin makes it harder for governments to interfere in citizens' finances and protects individuals from the regulations that traditional financial institutions work with and the risks individuals bear.
Why the US Dollar’s Status Is Important to Traders
The USD remains one of the strongest currencies by value and is easily the most widely used currency in global trade. For a currency impacted by news events, making the USD a Bitcoin-backed currency may have its snags.
For example, Bitcoin and other cryptocurrencies are volatile, and negative volatility could impact the exchange rate of currencies linked to Bitcoin. El Salvador sometimes reports that this could also affect the total value of investments. The economic implications vary but provide interesting opportunities for long or short Bitcoin traders.
RFK Jr.’s currency plans will also reduce or remove current challenges with cross-border payments, as experienced with fiat currencies. International and local trade are immediate potential beneficiaries of such a move.
Changes to the USD are expected following global events, such as political partnerships and a potential move from the USD as the primary currency for global reserves and international trade.
Conclusion
Current polls show that RFK Jr. is unlikely to win at the polls against current President Joe Biden, but there’s always the chance of an upset. Whether or not he becomes president next year, keeping track of changes to Bitcoin, the USD, and the global currency market is crucial to traders looking to plan and execute trades properly.