Bitcoin Rally Stalls as Trump Takes Office Amid Uncertainty Over Crypto Regulations
The Bitcoin rally sparked by US President-elect Donald Trump's election victory in early November is stalling as 2024 draws to a close. The digital asset wavered around $94,000 as of 2:55 p.m. on Tuesday in New York, about $14,000 below the record high set in mid-December.
Smaller tokens like Ether and meme-crowd favorite Dogecoin also struggled for traction. Trump's preference for crypto-friendly regulations and support for the idea of a national Bitcoin reserve lifted digital assets. However, scaled-back expectations for interest-rate cuts by the Federal Reserve have cooled the speculative frenzy.
More clarity on the US crypto regime is likely to emerge after Trump assumes power on January 20. The Republican's stance contrasts with President Joe Biden's administration, which cracked down on the scandal-prone sector. Chris Weston, head of research at Pepperstone Group, said "the momentum has come out of the post-election move" in Bitcoin, partly due to outflows from exchange-traded funds for the token.
The group of a dozen ETFs in the US have seen a net outflow of nearly $1.8 billion since December 19, according to data compiled by Bloomberg. Meanwhile, software maker turned Bitcoin accumulator MicroStrategy Inc. has been on a buying spree in the past few weeks. Traders are waiting to see if the company — which owns more than $40 billion of the digital asset — will continue a pattern of announcing Bitcoin purchases on Mondays.
The Bitcoin Rally and Trump's Election Victory
The Bitcoin rally began in early November, shortly after Donald Trump was elected as the President-elect of the United States. The digital asset saw a significant surge in value, with some analysts attributing it to Trump's campaign promises to support cryptocurrencies and promote economic growth.
Trump's stance on crypto regulations is seen as more favorable than that of President Joe Biden's administration. The Republican president has expressed support for the idea of a national Bitcoin reserve, which would involve the US government holding a significant portion of its reserves in Bitcoin. This move could potentially stabilize the digital asset and increase its adoption.
However, some analysts believe that Trump's economic policies may not be as favorable to crypto assets as initially thought. The Federal Reserve has scaled back expectations for interest-rate cuts, which has cooled the speculative frenzy surrounding Bitcoin. Additionally, the Federal Reserve has indicated that it will maintain a tight monetary policy to control inflation, which could put downward pressure on the digital asset.
The Role of Exchange-Traded Funds (ETFs) in the Bitcoin Rally
Exchange-traded funds (ETFs) have played a significant role in the Bitcoin rally. A group of a dozen ETFs in the US has seen a net outflow of nearly $1.8 billion since December 19, according to data compiled by Bloomberg.
This exodus from ETFs may be due to the fact that investors are no longer confident about the future price of Bitcoin. The decline in value of these funds could potentially weigh on the overall market and lead to a further decline in the price of the digital asset.
MicroStrategy Inc.'s Buying Spree
Software maker turned Bitcoin accumulator MicroStrategy Inc. has been on a buying spree in the past few weeks. The company, which owns more than $40 billion of the digital asset, has announced several large purchases of Bitcoin in recent months.
This buying spree may be an attempt by the company to signal to investors that it is committed to holding its significant position in Bitcoin. However, some analysts believe that this move could potentially put upward pressure on the price of the digital asset and lead to further speculation.
Conclusion
The Bitcoin rally sparked by Trump's election victory in early November is stalling as 2024 draws to a close. The digital asset wavered around $94,000 as of 2:55 p.m. on Tuesday in New York, about $14,000 below the record high set in mid-December.
More clarity on the US crypto regime is likely to emerge after Trump assumes power on January 20. However, scaled-back expectations for interest-rate cuts by the Federal Reserve have cooled the speculative frenzy surrounding Bitcoin. Additionally, outflows from exchange-traded funds and a buying spree by MicroStrategy Inc. may be putting downward pressure on the digital asset.
Only time will tell if the price of Bitcoin will continue to decline or recover in the coming months. One thing is certain: the future of crypto regulations in the US will play a significant role in determining the direction of the market.