Trump's Election Sends Bitcoin to New High: Halving Effect Combined with Trump Trade?

Trump's Election Sends Bitcoin to New High: Halving Effect Combined with Trump Trade?In recent days, the prices of various cryptocurrencies have surged, with Bitcoin reaching a new all-time high after briefly touching the $90,000 mark. This wave of price increases has been viewed by some analysts as a certainty bull market, but short-term volatility is still expected

Trump's Election Sends Bitcoin to New High: Halving Effect Combined with Trump Trade?

In recent days, the prices of various cryptocurrencies have surged, with Bitcoin reaching a new all-time high after briefly touching the $90,000 mark. This wave of price increases has been viewed by some analysts as a certainty bull market, but short-term volatility is still expected.

From the supply side, this surge resembles the previous Bitcoin halving effect. Bitcoin halving refers to the event when the amount of Bitcoin awarded to miners as a reward for processing transactions is halved. The most recent halving occurred in April of this year. Since Bitcoins inception, there have been three halvings: on November 28, 2012, July 9, 2016, and May 20, 2020. Historically, prices tend to rise after halvings. Following the halvings in 2012, 2016, and 2020, Bitcoins price rose approximately 93 times, 30 times, and 8 times, respectively, from their halving day prices to cycle peaks. However, market performance after this years halving was relatively muted, with prices experiencing a prolonged consolidation period over six months. It wasnt until Trump participated in a Bitcoin conference that the Trump Trade officially signaled the beginning of the markets upward trajectory.

From the demand side, the market widely believes that Trumps victory in the US election is the main factor driving the recent surge in Bitcoin. Trump has previously stated on multiple occasions that he would promote the development of the cryptocurrency industry after taking office. He and his family have also launched NFTs and DeFi (decentralized finance) products, leading him to be dubbed the first crypto president. Additionally, Vice President nominee Pence, Trumps key supporter Elon Musk, and other campaign supporters are also strong advocates for crypto. Therefore, Trumps election is perceived as a significant policy boon for the crypto sector.

Beyond the positive news brought about by Trumps election, the launch of US Bitcoin spot ETFs, the Federal Reserves interest rate cuts, and the hoarding of Bitcoin by large North American institutions have also contributed to the price surge. According to TheMinerMag data, as of the end of October, North American listed miners alone had accumulated over 62,000 Bitcoin. Additionally, institutions like MicroStrategy and BlackRock ETFs have made significant purchases. Institutional Bitcoin holdings have become mainstream since the previous cycle (around 2020).

The launch of US Bitcoin spot ETFs has significantly lowered the barrier to entry for Bitcoin purchases, opening up new channels for capital inflow. As of November 11, the asset size of US spot Bitcoin ETFs has reached $84 billion, equivalent to two-thirds of the asset size of gold ETFs.

From a liquidity perspective, the increased market liquidity during the Federal Reserves rate cut cycle has also been beneficial to financial markets. Consequently, we see not only the crypto market experiencing recent price increases, but also a robust performance in the US stock market.

Bitcoin researcher Hong Shuning believes that this bull market was inevitable. The listing of Bitcoin ETFs at the beginning of the year confirmed this trend. The US election outcome eliminated uncertainty, while Trump's full-fledged shift to supporting Bitcoin reinforced market confidence, particularly his policy ideas of adopting Bitcoin as a strategic reserve and the US government purchasing 1 million Bitcoin within five years. This has created boundless imaginative possibilities for Bitcoins price.

However, what lies ahead for Bitcoin after its meteoric rise? Analysts have also offered cautious warnings.

Jeffrey Ding believes that Bitcoins surge above $80,000 indicates further potential for price increases, but financial markets are inherently uncertain. Investors need to pay attention to the progress of policy implementation and macroeconomic indicators such as inflation trends. Policy changes can significantly impact market sentiment and investment direction, and inflation levels can also influence Bitcoins price performance. Once Trump officially enters the White House, the market will observe the implementation of his policies. Additionally, there is a potential risk of inflation rebounding in the US. In terms of investment strategy, Jeffrey Ding advises against ordinary investors chasing new meme coins or other tokens whose value is difficult to assess.

PANews senior analyst Wang Shengyu states that from a technical indicator standpoint, the recent surge in the crypto market has been somewhat aggressive, with various indicators exhibiting divergence signals. The Greed Index has hit 80, approaching its historical high, and the contract open interest has reached a historical peak of almost $100 billion. Therefore, these indicators suggest that FOMO sentiment is prevalent in the short-term crypto market, indicating a heightened risk of correction.

From a medium to long-term perspective, if Trump fulfills his previously promised policy support for the crypto industry after taking office, it could further promote industry development. However, Trumps trade protectionist policies could also further amplify inflationary pressures, forcing the Federal Reserve to adopt a tighter monetary policy, impacting market liquidity. Therefore, the medium to long-term trajectory of the crypto market still holds significant uncertainty. It is crucial to stay informed about market developments and adopt a cautious approach.

Hong Kong Victory Securities previously mentioned in a research report upon Trumps election that the cryptocurrency market is driven by various factors, with market sentiment showing significant improvement. Trumps election as US president provided the market with a short-term bullish signal, pushing Bitcoin and the overall cryptocurrency market capitalization upwards. With the Federal Reserves consecutive rate cuts and no clear indication of future direction, market expectations are that rate cuts will drive capital inflows into risk assets, further supporting the upward trend of Bitcoin and other crypto assets. The growth in stablecoin market capitalization also reflects the markets optimistic outlook for the future. The research report also advises investors to closely monitor market trends, operate cautiously, and avoid excessive chasing of price increases.

In conclusion, the recent surge in Bitcoin is a combined result of the halving effect and the Trump Trade. However, market fluctuations are unpredictable, and investors should remain rational, operate cautiously, and avoid blindly chasing price increases.