Bitcoin has now doubled its price in 2020, after surging early Thursday to above $14,900 for the first time since 2018. 

The cryptocurrency appeared to get a lift from the likeliest outcome of this week's U.S. elections, where a Democratic president is blocked from passing major initiatives (like tax cuts) by a Republican-controlled U.S. Senate. That could imply more monetary stimulus from the Federal Reserve, where Chair Jerome Powell is expected to announce no new actions Thursday after a two-day meeting this week but could signal a willingness to do whatever's needed to keep the economy and markets on track. 

Investors are "favoring bitcoin as a hedge against political risks," Lennard Neo, head of research for the cryptocurrency-focused firm Stack Funds, told clients in a weekly newsletter. 

In traditional markets, stocks rallied globally, Treasury yields dropped, the dollar declined and gold strengthened as investors reacted to the growing likelihood that a U.S. government led by former Vice President Joe Biden might struggle to enact tax cuts, pushing more of the onus of financing new Treasury debt onto the Federal Reserve.

Pundits on Wednesday picked apart this week's U.S. election results as previously too-close-to-call states got called. President Donald Trump, suddenly eyeing the all-too-real prospect of being labeled a loser, started mounting legal challenges wherever possible.

And bitcoin? It took a victory lap. 

Worries that election uncertainty might lead to a sell-off in the largest cryptocurrency were quickly replaced by bullish enthusiasm that some form of stimulus, whether fiscal or monetary, would ultimately push up prices for bitcoin, seen by many investors as a hedge against inflation.

The cryptocurrency has doubled this year as the Federal Reserve pumped more than $3 trillion of freshly printed money into global markets. The Standard & Poor's 500 Index of U.S. stocks, by contrast, is up just 6.6%.  

The return dynamic could come into sharper focus Thursday as Fed officials release a statement on this week's two-day, closed-door monetary-policy meeting. No major actions are anticipated, but Jerome Powell is expected to reiterate a pledge that the U.S. central bank stands ready to support markets if needed to kindle an economic recovery from the devastating toll of the coronavirus. 

"The policy announcement tomorrow will likely affirm their accommodative stance going forward, focusing on the status quo, and avoid creating policy uncertainty in the immediate wake of the election," Denis Vinokourov, head of research for the cryptocurrency prime broker Bequant, told First Mover in an email.

On Wall Street, traditional markets staged a relief rally Wednesday as Trump's Democratic challenger, Joe Biden, widened his lead in the race, with apparent victories called in Michigan and Wisconsin.

Bitcoin also appeared to benefit, which makes sense given that Biden has pledged to push for at least $5 trillion of new government spending on initiatives related to education, housing, health care, paid leave and infrastructure. Ostensibly the Treasury Department would have to borrow money to pay for the agenda, and the Fed would likely have to print money to finance the extra debt. 

Gridlock, with a split Congress that stonewalls major legislative initiatives, is viewed by many investors as the most halcyon environment for business continuity, and perhaps a bulwark against Biden's proposed tax increases. 

"Since members of Congress are the ones in charge of government spending, the puppet that sits as figurehead of the nation tends to play a side role in both fiscal and monetary policy," Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told clients Wednesday in a note.

What's less clear is whether a spending bill, which the Fed says is needed to promote a speedy economic recovery, could get passed during the next couple months if Trump loses. The Republican-controlled U.S. Senate proved unwilling to pass a big economic stimulus package over the past month even with Trump agitating for a deal. 

"If Biden ekes out a win, Trump will have little incentive to push through a deal for another round of stimulus, which could cause markets to sell off in the short term," the digital-asset analysis firm Messari wrote Wednesday in a note. "This sell-off could bleed into bitcoin."

That's if Trump agrees to go quietly – hard to imagine given his track record of combativeness.

"Trump is now tweeting about how his lead 'magically' disappeared, setting the stage for a contested election which would likely spell further volatility ahead," according to Messari.

The American electorate might be ready for respite from the drama. Bitcoin appears to have plenty of energy.  

Bitcoin has surged to around $14,720, the highest since January 2018, representing over 100% gains on year-to-date basis.

While Joe Biden was in the lead in the U.S. presidential race, Congress is heading toward a split, meaning the much anticipated fiscal stimulus could be smaller than previously expected.

"We may not know what a post-election stimulus may look like, but investors continue to believe that the Fed will keep printing money at a pace that favors bitcoin's finite supply," John Kramer, a trader at crypto liquidity provider GSR, told CoinDesk.

The cryptocurrency's convincing break above the June 2019 high of $13,880 has shifted the focus to the record high of $20,000 reached in December 2017. That's because there is very little resistance between $13,880 and $20,000.

That said, the rally is looking overstretched as per technical indicators such as the 14-day relative strength index. While an overbought reading does not imply a bearish reversal, it often yields a pause or a temporary pullback. The rising 10-day simple moving average (SMA) is the support to watch out for in the short-term.

- Omkar Godbole

Read More: Bitcoin Jumps Above $14.5K, Taking 2020 Gains to Over 100%

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