Crypto Quill

Bitcoin, the world’s largest cryptocurrency, has seen its largest two-day decline since the US election, slipping nearly 3% amid growing concerns over the policy impact of Donald Trump and the potential for inflation. As of November 18, 2024, the cryptocurrency hovered near $90,000, retreating from the highs it reached post-election.

A Major Drop Following Post-Election Optimism

The weekend of November 16-17 marked a significant downturn for Bitcoin, with the cryptocurrency falling by 3% over the two days. The dip brought Bitcoin down to approximately $90,100 in Singapore trading on Monday morning, dampening the enthusiasm that had followed Trump’s election win just days earlier.

This sudden decline comes after a period of exuberance in the crypto market, with investors initially celebrating the possibility of business-friendly policies from the incoming US President-elect. However, the reality of navigating inflation risks and trade tensions with key global partners has cooled investor confidence, contributing to the drop in Bitcoin’s price.

Traders Exercise Caution Amid Policy Uncertainty

The market shift signals that traders are in “assessing mode,” as they weigh the potential implications of Trump’s policy agenda on the future of cryptocurrency. Tony Sycamore, an analyst with IG Australia Pty, suggested that Bitcoin had become “overheated” following the US election results. Now, as attention turns to what Trump’s administration will actually deliver, caution seems to have taken hold.

A key area of concern is whether Trump can fulfill his promises related to cryptocurrency regulation. While his rhetoric has suggested a more crypto-friendly stance, the skepticism about his ability to push these policies through has caused some nervousness among traders.

• Trump’s promises include:
  • A favorable regulatory framework for crypto
  • A strategic US Bitcoin stockpile
  • Establishing the US as a global crypto hub

While these promises have fueled optimism in the markets, the gap between rhetoric and implementation could be a key factor influencing Bitcoin’s price movements in the coming months.

Inflation and Trade Tensions Affect Market Sentiment

Along with regulatory uncertainty, the broader economic picture is affecting market sentiment. The US stock market has been buoyed by Trump’s business-friendly policies, but the reality of rising inflation risks and the looming threat of trade tariffs are starting to temper these expectations.

Additionally, the role of the US Federal Reserve in shaping monetary policy is also under scrutiny. The Fed’s actions, particularly related to interest rates and inflation control, have a direct impact on speculative demand for assets like Bitcoin. Higher inflation and trade uncertainties could make investors more cautious, shifting focus away from riskier assets like cryptocurrencies.

What’s Next for Bitcoin Under Trump’s Presidency?

Trump’s administration has made promises that could potentially shape the future of Bitcoin and the broader crypto industry. Among these promises is the creation of a more clear and structured regulatory framework, which could provide significant benefits to venture capital investment, mergers, acquisitions, and public offerings in the crypto space.

However, not all of Trump’s proposed changes are viewed as likely. Strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou, have pointed out that while there’s hope for clearer crypto regulations, some promises, such as the creation of a US Bitcoin reserve, are considered low-probability events. In particular, the banking sector is eager to engage with digital assets, and the market is hopeful that regulatory clarity could pave the way for crypto exchange-traded funds (ETFs), which would further integrate digital currencies into traditional finance.

Will Regulatory Clarity Propel Bitcoin to New Heights?

The long-term trajectory of Bitcoin will heavily depend on how well Trump’s administration can manage the crypto regulatory environment. If the US does indeed establish a more collaborative regulatory framework, it could provide a significant boost to Bitcoin’s value. At the same time, markets will remain wary of the inflation risks and broader economic factors that could lead to greater volatility.

With Bitcoin now hovering around $90,000, the cryptocurrency’s next move will depend on both the domestic political landscape and broader global economic conditions. Traders are waiting to see how Trump’s policies unfold and whether they can bring the promised clarity to the crypto space.