The era of Trump 2.0 has arrived: What are the potential benefits for the market, and how much do various parties see?

Bitcoin continues to hit new highs; can investors really go long without thinking?

Written by: Socra, Golden Finance

On November 6, Trump won the U.S. election, and his return to the White House means the Trump 2.0 era is about to begin. Benefiting from his friendly attitude towards the crypto industry, BTC has repeatedly set historical highs, pushing towards the $80,000 mark, while altcoins have also welcomed a long-awaited upward trend.

Due to the strong momentum of this crypto market rally, many investors are concerned that the current crypto market may be somewhat overheated. Those who have already entered the market are also considering the market direction after Trump's victory and even making investment plans for when Trump officially takes office next year. In response, Golden Finance has compiled recent predictions and potential positive and negative events from various authoritative institutions regarding the future market.

1. Major Events Impacting the Crypto Market

Positive:

1. Inflows into Spot Bitcoin ETFs

On November 6, the total trading volume of spot Bitcoin ETFs exceeded $6 billion, with BlackRock's spot Bitcoin ETF trading volume surpassing $4.1 billion, setting a new historical high.

On November 7, BlackRock's Bitcoin ETF saw an inflow of $1.11692 billion, marking 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 lower the target range for 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 "FedWatch," the probability of a 25 basis point rate cut in December is 71%. The probability of maintaining the current rate in January next year is 16.6%, while the cumulative probability of a 25 basis point cut is 53%, and a 50 basis point cut is 30.4%.

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

3. Favorable Policies and Regulatory Easing

On November 6, the Republican Party gained control after securing key Senate seats in Ohio and West Virginia, meaning the Republicans now have a majority in the U.S. Senate. This could imply that Congress will be more supportive of cryptocurrencies, as the Republican-led Senate is expected to introduce clearer cryptocurrency regulations.

CoinShares: The biggest benefit of Trump for cryptocurrencies will be through the Bitcoin Act. Meanwhile, a senator from Wyoming has proposed the "2024 Bitcoin Act," aimed at establishing a strategic Bitcoin reserve to purchase 1 million Bitcoins within five years.

Trump's team is considering listing Robinhood's Chief Legal and Compliance Officer Dan Gallagher as a candidate for SEC Chairman.

SEC Commissioner Hester Peirce, known for her crypto-friendly stance, is seen as a potential successor for the next chairman.

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

Bernstein: After Trump's inauguration, the SEC and the Senate Banking Committee are expected to adopt a friendly attitude towards cryptocurrencies. It is anticipated that crypto assets will be re-rated, as it remains unclear whether these assets qualify as securities.

Additionally, legislation on stablecoins and market structure may progress more quickly, benefiting stablecoin issuers like Circle and Paxos, as well as U.S. cryptocurrency exchanges and brokers/dealers.

Coinbase's Chief Legal Officer hopes the SEC will stop suing cryptocurrencies and start formulating rules.

Bitwise Asset Management's investment director believes the entire crypto space has been constrained for years, but that should come to an end now. Investors have begun to build positions in crypto assets for the coming years.

Paradigm's policy research director: A former Biden White House staffer stated that Democrats will no longer fight cryptocurrencies to the end.

CCTV reported Bitcoin prices hitting new highs and noted that Trump had promised to establish a strategic Bitcoin reserve.

4. Financial Environment

After Trump's victory, Wall Street institutions like JPMorgan and Goldman Sachs are seeking potential opportunities for crypto companies to go public in the U.S., such as Kraken, Fireblocks, and Chainalysis.

Matrixport's weekly report shows that Bitcoin's adoption rate is nearing the critical 8% threshold, with approximately 7.51% of the global population (617 million people) using cryptocurrencies, close to the 8% adoption rate. Reaching this threshold could mark a turning point for Bitcoin towards mainstream application.

Negative:

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

Barclays stated that the Fed is expected to cut rates only twice by 2025, each by 25 basis points, down from a previous forecast of three cuts. The Bank of England is expected to maintain rates at its December meeting, contrary to earlier predictions of a cut.

Analysts from Orion Portfolio Solutions: Since the first rate cut, long-term rates have been on a sharply rising trajectory and began to decline after today's announcement of a rate cut. Against the backdrop of a strong U.S. economy, the path ahead for the Fed may be more complex than a steady rate cut.

2. Predictions from Various Parties

Bullish:

Galaxy's research director: Bitcoin has set multiple historical highs this week, and from a fundamental perspective, the market does not appear overheated.
Galaxy's CEO: Trump's victory could bring "hundreds of billions" to the crypto ecosystem.
Nansen analysts expressed similar views: "Bitcoin breaking historical highs on high trading volume is a clear signal of sustained positive momentum post-election."
JPMorgan: Bitcoin is expected to continue benefiting from Trump's victory for about the next eight weeks, with effects similar to those seen in 2016. Trump has repeatedly stated he will support the digital asset industry and raise tariffs, both of which could ultimately benefit Bitcoin.
QCP Capital: BTC has experienced rebounds during three election cycles, and its price has never fallen back to previous levels. It is expected that this bullish momentum will remain strong until 2025.
Standard Chartered: Bitcoin is expected to reach $125,000 by the end of this year and $200,000 by the end of 2025 after Trump's victory. In terms of regulation, it is anticipated that Trump will overturn Biden's veto of SAB 121.
Coinbase's CEO: From a policy perspective, cryptocurrencies will continue to exist until the industry is established in the U.S.
Bitwise's Chief Investment Officer: We are entering a golden age for cryptocurrencies, and we will see a strong bull market in the coming years.
Copper's research director: By January 20, 2025, when Trump takes office, Bitcoin's price is likely to reach $100,000. During Trump's presidency from 2016 to 2020, Bitcoin witnessed two historical high cycles. Although these increases occurred against a backdrop of a weakening dollar, which is different from the current strong dollar environment, the fact that spot Bitcoin ETFs currently hold about 1.1 million Bitcoins suggests that momentum may remain positive in the coming months.
CNBC: Bitcoin's price may reach $100,000 before the presidential inauguration.
Bernstein analysts: After Trump's victory, the headwinds for crypto regulation have turned into tailwinds. A new "crypto-friendly" SEC chairman and Senate Banking Committee are expected to accelerate regulatory transparency for the industry. The crypto industry is seeking new rules to define digital assets as something other than securities, the applicability of broker-dealer laws to crypto exchanges and DeFi, expedite the approval of investment products like ETFs, and allow banks to own and custody cryptocurrencies.
MakerDAO's founder: Trump's victory will drive a true and sustained revival of DeFi, with the likelihood of user numbers increasing tenfold, as DeFi benefits the most from reduced regulatory uncertainty in the U.S. compared to other aspects of the crypto space.

Bearish:

Analysts from Orion Portfolio Solutions: The future path of rate cuts may be more complex. The FOMC announced a 25 basis point rate cut in November as expected, indicating a reduction in their aggressiveness compared to the September cut. Notably, since the first rate cut, long-term rates have been on a sharply rising trajectory and began to decline after today's announcement. Given the strong U.S. economy, the Fed's future path may be more complex than a steady rate cut.
Canadian Imperial Bank of Commerce: Businesses and markets have reason to be cautious about Trump 2.0. Protectionism could become a negative factor for U.S. and global economic growth. Implementing fiscal stimulus in an economy with excess demand could reignite inflation risks and rising yields, further increasing the U.S. fiscal deficit.

Summary

From the mainstream views of major institutions at present, the vast majority are optimistic about the future of the crypto market and believe a new bull market may be on the horizon. In contrast, negative events and bearish sentiments have become the "minority," with bearish logic primarily stemming from the Fed's potential slowdown in rate cuts and the economic crisis that inflation may bring, which could affect the crypto market. However, given the current overall market situation, it is evident that choosing to sell or short at this time may be seen as going against the trend.

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