Trump's Cryptocurrency Promises: The End of a Bitcoin Bull Run and the Illusion of "Made in America" Bitcoin

Trump's Cryptocurrency Promises: The End of a Bitcoin Bull Run and the Illusion of "Made in America" BitcoinPresident-elect Trump's expressed support for cryptocurrencies during his campaign initially triggered a surge in prices for Bitcoin and other digital assets, culminating in an all-time high on December 17th. However, this market sentiment-driven rally quickly reversed, with Bitcoin experiencing a significant price correction and poised for its first monthly decline in four months

Trump's Cryptocurrency Promises: The End of a Bitcoin Bull Run and the Illusion of "Made in America" Bitcoin

President-elect Trump's expressed support for cryptocurrencies during his campaign initially triggered a surge in prices for Bitcoin and other digital assets, culminating in an all-time high on December 17th. However, this market sentiment-driven rally quickly reversed, with Bitcoin experiencing a significant price correction and poised for its first monthly decline in four months. This shift has prompted a reassessment of the feasibility of Trump's campaign promises, particularly his pledge to make Bitcoin entirely "Made in America," a goal now appearing increasingly unrealistic.

After reaching a record high of $108,316 on December 17th, Bitcoin's price promptly retreated to around $95,000, a drop of nearly 3%. Bitcoin futures prices subsequently fell further to $94,128. Other major cryptocurrencies, such as Ethereum and Dogecoin, also experienced declines. This marks the end of a four-month upward trend for Bitcoin and signals the start of its first monthly downturn.

This price correction is closely linked to the Federal Reserve's December interest rate decision. While the Fed lowered interest rates again, its indication of only two further rate cuts next year dampened market confidence, contributing to Bitcoin's price drop. Tony Sycamore, a market analyst at IG Australia Pty, noted in a report that while the Fed's decision wasn't unexpected, its outcome acted as a catalyst, clearing out some of the excessive speculation in risk assets (including stocks and Bitcoin) that followed the US election. Federal Reserve Chairman Powell's subsequent press conference, explicitly stating the Fed's lack of interest in holding Bitcoin, further impacted investor sentiment in the cryptocurrency market.

Furthermore, the expiration of a massive number of Bitcoin and Ethereum futures contracts last Friday exacerbated market volatility. Major brokerage FalconX pointed out that this was one of the largest futures contract expirations in cryptocurrency history, requiring market participants to prepare for potentially significant fluctuations. Sean McNulty, trading director at market liquidity provider Arbelos Markets, noted that significant volatility is a risk inherent in past cryptocurrency futures expirations. Despite MicroStrategy's indication of potentially expanding its token purchasing program the company currently holds over $40 billion in digital assets, reflecting the market's volatility through its significant investment Bitcoin and other cryptocurrencies still face considerable market pressure.

However, a deeper cause for the reversal of Bitcoin's bull run lies in investor skepticism regarding the feasibility of Trump's cryptocurrency-related promises. Following a June meeting with cryptocurrency mining executives, Trump shifted his stance to publicly support cryptocurrencies, announcing on social media his plan to make Bitcoin entirely "Made in America." This stance garnered him approximately $135 million in campaign funds from the cryptocurrency industry, significantly more than from any other sector. His post-election promises included creating a cryptocurrency-friendly environment in the US and even suggested establishing a Bitcoin national reserve.

However, the market widely views these promises as difficult to fulfill. Ethan Vera, COO of Seattle-based Luxor Technologies, noted that while Trump's statements are consistent with his style, they are detached from reality. He cited several unrealistic factors:

First, the decentralized nature of blockchain technology prevents any single entity from completely controlling or prohibiting participation. The global Bitcoin mining market is characterized by widespread participation and intense competition.

Second, Bitcoin's total supply is capped at 21 million coins, a core design feature. Currently, approximately 95% of Bitcoin has already been mined, with the remaining coins requiring roughly 100 years to mine.

Third, while the US Bitcoin mining industry is rapidly growing and has become a multi-billion dollar sector, its computing power remains far below half of the global total. Therefore, supporting the entire Bitcoin network solely with US-based companies is virtually impossible.

Fourth, global competition in the cryptocurrency mining industry is intensifying, with new entrants including Russian oligarchs and the Dubai royal family. Taras Kulyk, CEO of Synteq Digital, one of the largest brokers of Bitcoin mining computers, pointed to the rapid growth of cryptocurrency mining operations in Asia, Africa, and the Middle East, with increasing demand in countries like Kazakhstan. Russia's lenient policies toward the cryptocurrency industry have also stimulated its resurgence. In many African and South American countries, the profit margins for Bitcoin mining are significantly higher than in the US, with low-cost energy and hydroelectric resources providing favorable conditions. For instance, Ethiopia has become one of the fastest-growing cryptocurrency mining hubs on the continent. Dollar-denominated mining revenue also offers operators in countries like Argentina a hedge against inflation. Even some US miners are expanding overseas due to rising electricity costs in places like Texas. Marathon Digital Holdings, one of the largest mining companies by market capitalization, plans to collaborate with a company under a sovereign wealth fund in Abu Dhabi to build one of the largest cryptocurrency mines in the Middle East. Furthermore, even domestic US cryptocurrency mining operations are not exclusively US-based. Many miners offer hosting services, allowing participation from individuals and businesses both within and outside of the United States.

Beyond these factors, Vera also noted that Trump's high tariff policies could increase the cost of Bitcoin mining equipment, harming miners as equipment and electricity represent their two largest expenses. Thus, Trump's trade policies could negatively impact the US cryptocurrency mining industry.

In conclusion, while Trump's promises regarding cryptocurrency support initially created a market frenzy, their feasibility faces numerous challenges. The Bitcoin price correction and the skepticism surrounding "Made in America" Bitcoin reflect a rational market assessment of these pledges. Decentralization, limited supply, global competition, and potential trade policy risks all make Trump's promises extremely difficult to achieve, further highlighting the complexity and volatility of the cryptocurrency market.