Bitcoin Nears All-Time High: The Trump Effect and the Future of the Cryptocurrency Market

Bitcoin Nears All-Time High: The Trump Effect and the Future of the Cryptocurrency MarketDriven by a series of events, Bitcoin's price has once again approached its all-time high, surpassing $90,000 on November 18th. Behind this surge, U

Bitcoin Nears All-Time High: The Trump Effect and the Future of the Cryptocurrency Market

Driven by a series of events, Bitcoin's price has once again approached its all-time high, surpassing $90,000 on November 18th. Behind this surge, U.S. President-elect Trump and his related activities play a crucial role. Trump Media & Technology Group is reportedly in acquisition talks with Bakkt, the cryptocurrency exchange platform owned by Intercontinental Exchange (ICE). Trump himself also met with Coinbase's CEO to discuss next administration appointments. Fueled by this news, Bakkt's stock price soared by 162.46%, reaching a market capitalization of approximately $400 million; Trump Media & Technology Group's stock rose by 16.65%, with a market cap of $7.11 billion; and Coinbase's stock climbed 6.4%, resulting in a market capitalization of around $80 billion. The market dubbed this the "Trump trade," sending the cryptocurrency market into a frenzy.

Following Trump's election victory, the price of Bitcoin surged by over 30%, with the market anticipating that the new administration would implement policies favorable to the cryptocurrency industry. Trump previously pledged that, if re-elected, he would ensure the government retained 100% of its Bitcoin holdings and designate it as a strategic reserve asset. However, pricing on the prediction platform Polymarket suggests only a 30% probability of Trump establishing a Bitcoin reserve upon taking office. Jennifer J. Schulp, director of financial regulation research at the Cato Institute's Center for Monetary and Financial Alternatives, points out the risks associated with establishing a Bitcoin reserve, given Bitcoin's inherent volatility.

Gao Chengshi, executive committee member of the Blockchain Special Committee of the China Computer Federation, notes that cryptocurrency investment differs significantly from traditional securities and futures. While many countries strictly regulate cryptocurrency exchanges, numerous factors can influence or even manipulate cryptocurrency prices. The high degree of internationalization of different cryptocurrencies makes it difficult to fully control risks. Even Bitcoin, a cryptocurrency with high consensus, exhibits price volatility far exceeding that of traditional trading instruments. Therefore, retail investors, institutional investors, and even national governments should exercise caution when investing in cryptocurrencies. Newer cryptocurrencies carry even higher investment risks, but also potentially greater rewards. Furthermore, Trump's policies are expected to increase U.S. inflation, leading to higher U.S. Treasury yields and a stronger dollar factors that could negatively impact cryptocurrencies like Bitcoin. Despite current market optimism, the cryptocurrency market still faces numerous challenges, and its ability to usher in a "golden age" remains uncertain.

Bitcoin Returns Above $90,000: Multiple Factors Drive the Surge

In January, Bitcoin's price fell below $40,000; it has now more than doubled. Ding Zhaofei, chief analyst at HashKey Group, explains that Bitcoin's recent price surge, reaching a record high of $93,000 and a market capitalization exceeding $1.8 trillion, surpassed silver to become the world's eighth-largest asset. Zhao Wei, senior researcher at OKX Research Institute, also noted Bitcoin's price exceeding $92,000 on November 18th.

This upward trend is influenced by the outcome of the U.S. election, particularly Trump's positive stance on cryptocurrencies, which ignited investor interest. Following the election results, the Federal Reserve's rate cuts and inflows into Bitcoin spot ETFs further boosted market sentiment.

Ding Zhaofei identifies three main reasons for Bitcoin's rise: first, potential policy support from a Trump administration, including inclusion in government reserves, the establishment of a presidential advisory council, and changes to the SEC chair; second, a regulatory and policy vacuum during the White House transition, creating a more relaxed political environment that eases financial market tension; third, increased market liquidity resulting from the Fed's continued rate cuts, driving demand for high-risk assets like Bitcoin. Additionally, MicroStrategy's purchase of approximately 51,780 Bitcoins for roughly $4.6 billion in the past week, along with its plan to issue $1.75 billion in convertible notes for further purchases, contributed to Bitcoin's momentum. Market optimism following a mid-term adjustment since April also fueled the upward trend.

Bitcoin's Future Trajectory: Opportunities and Challenges Coexist

Driven by the "Trump trade," Bitcoin's cumulative gains exceed 30%. Ding Zhaofei notes Bitcoin's strong upward momentum, even exhibiting independent performance from the Nasdaq. However, he cautions it's premature to determine whether the "Trump rally" has ended. The impact of cooling expectations for Fed rate cuts is short-term; the market may quickly price in the downward revision of rate cut expectations, and the trend of a soft landing for the U.S. economy and core corporate profit growth remains unchanged in the long term.

Bitcoin faces short-term selling pressure. On-chain data reveals that over 20,000 Bitcoins flowed out of centralized exchanges this week, although this volume is smaller than the scale of buying from new investors. The average unrealized profit for short-term investors remains high at 26%, indicating substantial selling pressure remains. If capital inflows slow, prices could decline in the short term. The significant divergence in bullish and bearish sentiment is also a reason for recent price volatility.

Zhao Wei cautions that sustained price increases depend on how quickly investors absorb positive news and the implementation timeline of policy changes. In the long term, Trump's re-election could positively impact the regulatory process for the crypto market. As Bitcoin's leading position solidifies, it's expected to attract more institutional and individual investors. However, given the volatility of the crypto market and global economic uncertainty, investors should remain cautious.

Several analysts predict further upside for Bitcoin. Pat Tschosik, strategist at Ned Davis Research, anticipates Bitcoin surging to over $120,000 by next spring. Geoff Kendrick, global head of digital asset research at Standard Chartered Bank, predicted in October that if Trump won, Bitcoin would reach $125,000 by the end of this year and $200,000 by the end of 2025. Ding Zhaofei also maintains a cautiously optimistic outlook, anticipating further upside potential for Bitcoin. With Republicans controlling both houses of Congress and a conservative majority on the Supreme Court, the "unified government" could bring a new wave of Web3 opportunities.

A Policy Milestone? Regulation and Innovation in Parallel

This year has seen continuous positive developments in the cryptocurrency market. Following the launch of Bitcoin and Ethereum spot ETFs, the next U.S. government and Congress will likely support cryptocurrencies. Ding Zhaofei believes that Trump's election and Republican control of Congress will facilitate legislative progress, potentially accelerating the passage of several bills related to the crypto industry, significantly boosting its growth. A major change in the future crypto industry will be the entry of regulators, which will transition the industry from unregulated to regulated. This process will inevitably lead to significant elimination and reshuffling. Furthermore, the current crypto industry suffers from overall infrastructure overcapacity; RWA (Real-World Assets) and Payfi (payment finance) may be key areas for major transformation in this cycle. We should also focus on innovative breakthroughs in applications.

Zhao Wei notes that U.S. policy direction has a profound impact on the cryptocurrency market. Policy adjustments and changes in the regulatory framework could create new opportunities. The introduction of Bitcoin and Ethereum spot ETFs is a key step towards mainstream finance, but it could also lead to higher market stability. However, gradual policy implementation faces many uncertainties, particularly in the absence of unified global regulatory standards. The integration of cryptocurrencies with traditional financial systems remains challenging. Transparency and security will be core issues for the healthy development of the crypto industry. Finding a balance between innovation and regulation will significantly influence the future trajectory of the cryptocurrency market.

Gao Chengshi points out that this year might be a milestone for Bitcoin, but not necessarily for the cryptocurrency market as a whole. Bitcoin and other cryptocurrencies have taken quite different market development paths, closely related to the design and initial goals of different cryptocurrencies, such as fixed supply design and varying degrees of decentralization. Bitcoin, due to its fixed supply and complete decentralization, is likely to continue attracting investor interest. However, the cryptocurrency market remains uneven, with ongoing selection and elimination of different cryptocurrencies. The consensus on the highest-quality assets may further strengthen.

Cryptocurrency's Enhanced Role in Investment Portfolios: Risks and Opportunities Await

With increasing enthusiasm for Bitcoin and other cryptocurrencies among Wall Street institutions, retail investors, and the U.S. government, cryptocurrencies are taking on a more significant role in investment portfolios. Ding Zhaofei notes that Bitcoin has become a reality as an asset class option for investment institutions; it is both a risk asset and has value reserve attributes offering risk mitigation. From the perspective of long-term value growth, this bull market will encourage more investment institutions to allocate to Bitcoin and crypto assets.

Zhao Wei believes that as market acceptance of cryptocurrencies like Bitcoin increases, they are likely to become an indispensable part of many institutional and individual investment portfolios. Bitcoin, as a potentially powerful asset diversification tool, exhibits low correlation with traditional assets, mitigating portfolio risk to some extent. From the perspective of long-term growth, Bitcoin's historical performance has shown substantial returns for investors. The launch of Bitcoin spot