Trump 2.0 Era is Coming: Is the Crypto Market Really Smooth Sailing?

Author: Socra, Golden Finance

On November 6, Trump won the US election and returned to the White House, which means that the Trump 2.0 era is about to begin. Benefiting from his friendly attitude towards the crypto industry, BTC has repeatedly set new historical highs and hit the $80,000 mark, and altcoins have ushered in a long-awaited rising market.

Due to the fierce upward momentum of the crypto market this time, many investors are worried whether the current crypto market is a bit overheated. Investors who have already boarded the train are also considering the market trend after Trump's victory, and even making investment plans for Trump's official inauguration next year. In this regard, Golden Finance has sorted out the recent forecasts of various authoritative institutions on the market outlook and possible positive and negative events.

1. Major events affecting the crypto market

Positive:

1. Inflow of spot Bitcoin ETF

On November 6, the total transaction volume of spot Bitcoin ETF exceeded US$6 billion, and the transaction volume of BlackRock's spot Bitcoin ETF exceeded US$4.1 billion, a record high.

On November 7, BlackRock Bitcoin ETF received $1.11692 billion, the largest inflow since its launch. The top four daily inflows were: $1.11692 billion on November 7; $872 million on October 30; $849 million on March 12; and $788 million on March 5.

2. Interest rate cut cycle

On November 7, Eastern Time, the Federal Reserve announced after the FOMC meeting that it would reduce the target range of the federal funds rate from 4.75% to 5.0% to 4.5% to 4.75%, a decrease of 25 basis points (bp).

According to CME's "Fed Watch", the probability of the Federal Reserve cutting interest rates by 25 basis points in December is 71%. The probability of maintaining the current interest rate unchanged by January next year is 16.6%, the probability of a cumulative interest rate cut of 25 basis points is 53%, and the probability of a cumulative interest rate cut of 50 basis points is 30.4%.

JPMorgan Chase expects the Fed to cut interest rates quarterly after the December policy meeting until the federal funds rate reaches 3.5%.

3. Poor policies and loose regulation

On November 6, the US Republican Party took control after securing key Senate seats in Ohio and West Virginia, meaning that the Republican Party has gained majority control of the US Senate. This may mean that the US Congress will be more supportive of cryptocurrencies as the Republican-led Senate is expected to prepare clearer cryptocurrency regulations.

CoinShares: Trump's biggest benefit to cryptocurrencies will be the passage of the Bitcoin bill. At the same time, Wyoming senators proposed the "Bitcoin Act of 2024", which aims to establish a strategic Bitcoin reserve and purchase 1 million Bitcoins within five years.

The Trump team is considering listing Robinhood Chief Legal and Compliance Officer Dan Gallagher as a candidate for the chairman of the US Securities and Exchange Commission.

Hester Peirce, a crypto-friendly commissioner of the US SEC, is considered a potential successor to the next chairman.

Ethereum technology expert Vinay Gupta plans to promote crypto policies to the Trump transition team.

Bernstein: The US SEC and Senate Banking Committee are expected to take a friendly attitude towards cryptocurrencies after Trump takes office. Crypto assets are expected to be re-rated because it is unclear whether these assets qualify as securities.

In addition, both stablecoin and market structure bills may make faster progress, which is good for stablecoin issuers such as Circle and Paxos, as well as US cryptocurrency exchanges and brokers/dealers.

Coinbase Chief Legal Officer: I hope the SEC will stop suing cryptocurrencies and start making rules.

Bitwise Asset Management Investment Director believes that the entire currency circle has been like being tied up for many years, but now it should come to an end. Investors have now begun to build positions for crypto assets in the next few years.

Paradigm Policy Research Director: Former Biden White House staff said Democrats will no longer fight cryptocurrencies to the end.

CCTV reported that the price of Bitcoin broke a new high and said that Trump had promised to establish a strategic reserve of Bitcoin.

4. Financial environment

After Trump's victory, Wall Street institutions such as JPMorgan Chase and Goldman Sachs sought potential opportunities for US IPOs of crypto companies, such as Kraken, Fireblocks and Chainalysis.

Matrixport's weekly report shows that Bitcoin's penetration rate is close to the critical 8% threshold, with about 7.51% of the world's population (617 million people) using cryptocurrencies, close to an 8% penetration rate. Reaching this threshold may mark a turning point for Bitcoin's move toward mainstream application.

Negatives:

Powell: As we approach the neutral interest rate, it may be necessary to slow down the pace of rate cuts.

Barclays said it expects the Federal Reserve to cut interest rates only twice in 2025, by 25 basis points each time, compared with a previous forecast of three rate cuts. The Bank of England is expected to keep interest rates unchanged at its December meeting, compared with a previous forecast of a rate cut.

Orion Portfolio Solutions analyst: Since the first rate cut, long-term interest rates have been on a sharp upward trajectory and began to decline after the rate cut was announced today. Against the backdrop of a strong U.S. economy, the road ahead for the Fed may be more complicated than steady rate cuts.

Second, predictions from all parties

Bullish:

Galaxy Research Director: Bitcoin has hit record highs several times this week, and from a fundamental perspective, the market does not appear overheated.

Galaxy CEO: Trump's victory may bring "hundreds of billions of dollars" to the crypto ecosystem.

Nansen analysts expressed similar views. "Bitcoin's breakthrough of historical highs under high trading volume is a clear signal of continued positive momentum after the election,"

JPMorgan Chase: Bitcoin will continue to benefit from Trump's victory in the next eight weeks or so, and Trump's victory will have similar repercussions to 2016 in the next eight weeks or so. Trump has repeatedly stated that he will support the digital asset industry and increase tariffs, and both policies may ultimately help Bitcoin.

QCP Capital: BTC has experienced three election cycles, all of which have rebounded and the price has never fallen back to its previous performance. This bull market momentum is expected to remain strong in 2025.

Standard Chartered Bank: Bitcoin will reach $125,000 by the end of this year after Trump wins the election, and $200,000 by the end of 2025. In terms of regulation, Trump is expected to overturn Biden's veto of SAB 121.

Coinbase CEO: From a policy perspective, cryptocurrencies will continue to exist until the industry is established in the United States.

Bitwise Chief Investment Officer: We are entering the golden age of cryptocurrencies, and we will see a strong bull market in the next few years.

Copper Research Director: By the time Trump takes office as president on January 20, 2025, the price of Bitcoin is likely to reach $100,000. For Bitcoin, Trump witnessed two historical high cycles during his presidency from 2016 to 2020. Although these gains occurred against the backdrop of a weaker dollar, it is different from the current environment of a stronger dollar. However, given that the Bitcoin spot ETF currently holds about 1.1 million Bitcoins, the momentum is likely to remain positive in the coming months. ”

CNBC: Bitcoin prices may reach $100,000 before the presidential inauguration.

Bernstein analyst: After Trump's victory, the headwinds of crypto regulation have turned into tailwinds. It is expected that the new "crypto-friendly" SEC chairman and Senate Banking Committee will accelerate regulatory transparency in the industry. The crypto industry is seeking new rules to define digital assets as assets other than securities, the applicability of broker laws to crypto exchanges and DeFi, accelerate the approval of investment products such as ETFs, and allow banks to own and custody cryptocurrencies.

MakerDAO founder: Trump's victory will drive a truly sustained revival of DeFi, and the possibility of a 10-fold increase in the number of users will greatly increase because DeFi benefits the most from reduced uncertainty in U.S. regulation compared to other aspects of the crypto field.

Bearish:

Orion Portfolio Solutions analyst: The path to future rate cuts may be more complicated. FOMC The 25 basis point rate cut announced as expected in November marked a reduction in their aggressiveness relative to the September rate cut. It is worth noting that since the first rate cut, long-term interest rates have been on a sharp upward trajectory and began to decline after the rate cut was announced today. Against the backdrop of a strong US economy, the road ahead for the Fed may be more complicated than steady rate cuts.

Scotiabank: Businesses and markets have reason to be cautious about Trump 2.0. Protectionism will become a headwind for US and global economic growth. Fiscal stimulus for the US economy with excess demand will again This will trigger inflation risks and rising yields, and further increase the US fiscal deficit.

Summary

Based on the mainstream views of major institutions, the vast majority of them are optimistic about the future of the crypto market and believe that a new bull market may be coming. On the other hand, negative events and bearish comments have become the "minority". The bearish logic mainly comes from the economic crisis caused by the slowdown in the Fed's interest rate cuts and inflation, which may affect the crypto market. However, judging from the overall market conditions at this stage, it is obvious that traders who choose to sell or short at this time are suspected of going against the trend.