Is Trump Really Good for Bitcoin? Wall Street Journal Columnist: The Three Reasons for Bitcoin Bullishness Are All Wrong

Is Trump Really Good for Bitcoin? Wall Street Journal Columnist: The Three Reasons for Bitcoin Bullishness Are All WrongSince the night of the US presidential election, the price of Bitcoin has skyrocketed, adding nearly $500 billion in market value in less than two weeks, a near one-third increase. However, some market analysts believe that Trump's policies on cryptocurrency may not be good news, and may even lead to an outflow of funds from the Bitcoin market

Is Trump Really Good for Bitcoin? Wall Street Journal Columnist: The Three Reasons for Bitcoin Bullishness Are All Wrong

Since the night of the US presidential election, the price of Bitcoin has skyrocketed, adding nearly $500 billion in market value in less than two weeks, a near one-third increase. However, some market analysts believe that Trump's policies on cryptocurrency may not be good news, and may even lead to an outflow of funds from the Bitcoin market.

In an article titled "Bitcoin May Not Benefit From Looser Regulation," James Mackintosh, a senior market columnist for the Wall Street Journal, pointed out that Bitcoin itself is almost entirely free from regulatory pressure, and looser regulation may actually lead to increased demand for other cryptocurrencies, resulting in outflows from the Bitcoin market.

Mackintosh explains that deregulation often attracts more investors, which in turn pushes up commodity prices. This is especially true for cryptocurrencies, as they have little fundamental support and are entirely determined by market sentiment and supply. Therefore, more buyers mean higher prices.

However, Bitcoin, as the "parent currency" of cryptocurrencies, is somewhat special: Unlike most other cryptocurrencies, Bitcoin is considered a commodity rather than a currency. Therefore, Bitcoin is almost entirely free from regulatory pressure.

Mackintosh also refutes the common reasons why some investors are currently bullish on Bitcoin:

Firstly, Trump's relaxation of regulations on the crypto market is not good for Bitcoin. Since Bitcoin itself is almost entirely unregulated, looser regulation may actually attract more investors into other cryptocurrency markets, leading to an outflow of funds from the Bitcoin market.

Secondly, Trump's promise of a "strategic national Bitcoin reserve" is not necessarily feasible. Mackintosh believes that creating a Bitcoin reserve does not align with the US's economic needs. The US does not need to rely on foreign exchange reserves to support the dollar, but rather uses "the credit of the US government" to support the dollar. Strategic currency reserves are typically for countries with unstable exchange rates, or for countries that need to convert trade surpluses into overseas assets, categories that the US clearly does not belong to.

Finally, Bitcoin is not a good hedge against inflation. While some investors believe that Bitcoin can hedge against the potential high inflation Trump may bring, Mackintosh believes that Bitcoin is more closely related to speculative stocks, rather than traditional inflation hedges like gold or inflation-linked bonds. He writes: "Bitcoin relies more on animal spirits than economic analysis, no wonder it likes Trump."

So why has the price of Bitcoin surged after Trump's election?

Besides market sentiment, there are three common explanations:

Firstly, Trump has clearly supported cryptocurrencies. As the largest cryptocurrency, many investors have directly purchased Bitcoin. However, as Mackintosh points out, what is good for cryptocurrencies is not necessarily good for Bitcoin.

Secondly, Trump has promised to establish a "strategic national Bitcoin reserve." Some investors believe this could support the price of Bitcoin. There are even rumors that other countries may purchase Bitcoin ahead of the Trump administration's Bitcoin purchase plan. However, Mackintosh believes that establishing a Bitcoin reserve does not align with the US's economic needs, and even if there were a need, Trump would not necessarily divert US resources from spending or tax cuts to buy Bitcoin.

Thirdly, the bond market has been betting that Trump's policies will lead to higher inflation. Some Bitcoin buyers believe that Bitcoin can hedge against inflation. But Mackintosh believes that Bitcoin has never been a good hedge against inflation.

Alex Thorn, head of research at GalaxyDigital, also agrees with Mackintosh, saying: "If the Treasury or Fed said they were going to buy Bitcoin to support the dollar, that would be very bad for the dollar, just as if they said they were going to buy candy or toothpaste to support the dollar. The dollar is backed by the 'full faith and credit' of the United States."

In conclusion, although Bitcoin prices have surged after Trump's election, market analysts believe that Trump's stance on cryptocurrency is not advantageous for Bitcoin, and the three common reasons for Bitcoin bullishness are all unfounded. Bitcoin price movements are largely driven by market sentiment and speculative behavior, rather than fundamentals.