Bitcoin saw its largest two-day decline since the U.S. presidential election, dropping nearly 3% over the weekend before recovering slightly. By Monday morning in Singapore, it was trading at $90,100. This retreat follows caution in global markets as traders assess the impact of President-elect Donald Trump’s policy agenda on digital assets.
Uncertainty Surrounds Trump’s Crypto Agenda
One of the key concerns for investors is the uncertainty surrounding Trump’s promises regarding cryptocurrency. He has pledged to create a U.S. Bitcoin stockpile and establish a regulatory framework that supports digital assets. However, the timeline for these initiatives and their feasibility remain unclear, keeping the market on edge.
Mixed Sentiment in the U.S. Stock Market
While the U.S. stock market initially rallied with hopes of a business-friendly agenda under Trump, concerns over inflation and the potential risks from trade tariffs and deficit spending have caused caution. Investors are revising their expectations for Federal Reserve interest rate cuts, which could influence liquidity and, in turn, affect demand for speculative assets like Bitcoin.
Bitcoin’s Recent Surge and Correction
According to Tony Sycamore, a market analyst at IG Australia Pty, Bitcoin’s dramatic rise since Election Day on November 5 may have led to an “overheated” market. He noted that “a lot of good news has been built into the price,” suggesting that the recent drop is part of a normal market correction following a record-breaking increase.
Trump’s Shift on Cryptocurrency Policies
Trump, who once expressed skepticism toward cryptocurrency, has recently pledged to make the U.S. a global leader in the sector. He has outlined plans to establish a strategic Bitcoin stockpile and create a more favorable regulatory environment for digital assets. His position has shifted after cryptocurrency firms heavily supported his election campaign, advocating for policies that align with their interests.
JPMorgan Anticipates Policy Changes Under Trump
Strategists at JPMorgan Chase & Co., led by Nikolaos Panigirtzoglou, believe that the Trump administration could soon introduce crypto-friendly legislation, moving away from regulation-by-enforcement toward a more collaborative approach. This shift could open doors for banks to engage more with digital assets and boost optimism about the approval of crypto exchange-traded funds (ETFs) that invest in assets beyond just Bitcoin and Ether.
Regulatory Clarity Could Boost Investment
According to JPMorgan, clearer regulatory guidelines could provide a significant boost to venture capital, mergers and acquisitions, and initial public offerings in the cryptocurrency sector. However, the establishment of a U.S. Bitcoin reserve is considered a “low-probability event” by the strategists, tempering some of the more optimistic forecasts.
ETF Inflows and Outflows Reflect Investor Hesitance
Between November 6 and November 13, U.S. Bitcoin ETFs saw a net inflow of $4.7 billion, coinciding with Bitcoin’s all-time high. However, on Thursday and Friday, around $771 million was withdrawn from these products, signaling a shift in investor sentiment as market uncertainties regarding Trump’s policies began to surface.
Bitcoin’s recent market movements highlight the balancing act investors must navigate between enthusiasm for potential regulatory changes and concerns about broader economic factors that could influence its value.