If Bitcoin has been riding a wave of optimism linked to Donald Trump's potential political comeback, now that Tycoon has been elected as the 47th president of the United States, we can say Bitcoin has literally hit a record of $75,000. This suggests a significant surge in market sentiment, likely fueled by speculation that a Trump victory could lead to more favorable conditions for cryptocurrencies.

Call it or not a Trump effect, after having recorded its all-time high, breaking through the wall of 75 thousand dollars, Bitcoin is gaining almost 8% in these hours. Ether is also making the same gains, trading around $2,619. "A rally that is not surprising given the position clearly in favor of Trump, who, in addition to having launched a new cryptocurrency platform "The DeFiant Ones" (a name that plays on the concept of decentralized finance) last August, owns, according to The Verge, 1 and $5 million in a virtual ethereum key" says Massimiliano Carrà on Forbes Italy.

Trump has historically been perceived more crypto-friendly, especially when compared to other political figures who have proposed stricter regulations on the industry. In his latest administration he generally took a hands-off approach to cryptocurrencies, which many in the crypto community appreciated as it allowed the space to develop with relatively fewer governmental restrictions.

During his first presidential campaign, the cryptocurrency ecosystem saw significant growth, likely due to the promise of deregulation and more market freedom. So the question is how far the crypto market will go, today on? If traders are anticipating these factors aligning favorably with Trump's policies, it could further boost their enthusiasm for Bitcoin as a store of value or hedge.

Elements to analyze

Highlighting some points about the relationship between Trump's re-election and cryptocurrencies environment here's a list of the factors involved in this potential diverse outcome of the market, that will maybe lead to a new balance between old and new economy, as we usually say here at The Meta Economist.

Let's unpack a few key themes and examine how they could impact Bitcoin and the broader cryptocurrency market:

1. Historical Context of Deregulation and Crypto Growth: Under Trump's administration, there was relatively little regulatory action against cryptocurrencies, which allowed the industry more freedom to expand. While Trump himself didn’t promote Bitcoin, his administration leaned towards policies that minimized interference, especially from agencies like the SEC. This environment contributed to a broader sentiment that deregulation or laissez-faire policies would benefit crypto markets, which often thrive on perceived freedom from traditional financial oversight.
2. Potential 2024 Trump Presidency and Crypto Sentiment: If Trump were to regain office in 2024, traders might indeed expect a return to more favorable conditions for crypto. This potential scenario could rally investors, particularly if they anticipate fewer barriers and a reduction in aggressive regulatory oversight from agencies like the SEC, which under the Biden administration has pursued several high-profile cases against crypto firms. The assumption that Trump would offer a “lighter touch” might be driving some of the speculative enthusiasm in Bitcoin and other cryptocurrencies. However, it’s worth noting that even a pro-crypto stance wouldn’t guarantee a return to the earlier regulatory conditions, especially given the broader market’s maturity and global calls for clearer crypto regulation.
3. Bitcoin as a Hedge and Safe-Haven Asset: Cryptocurrencies, particularly Bitcoin, have increasingly been seen as hedges against economic instability, inflation, and fluctuations in traditional markets. With high inflation rates and concerns about the stability of fiat currencies, many investors turn to Bitcoin as a store of value. If Trump’s policies are perceived to align with economic growth or a stable dollar, it could strengthen this perception, driving more investors to view Bitcoin as an effective alternative asset.
4. Broader Economic and Market Impacts: Besides the specific influence of a Trump administration, Bitcoin’s price is shaped by a mix of economic conditions, including Federal Reserve policy, inflation rates, and global market trends. A Trump administration could theoretically lead to policies that stimulate economic growth, and if paired with continued inflation concerns or traditional market uncertainties, crypto could continue to attract a strong influx of capital. However, it’s equally plausible that if Bitcoin reaches a record high around $75,000, institutional investors might start profit-taking, adding volatility to the mix.
5. Speculative Market Sentiment: The recent Bitcoin rally seems to reflect speculative sentiment as much as political foresight. Crypto markets are well-known for rapid swings in investor mood, and political developments are often used to drive trading volumes and price action. If Trump’s campaign gains more momentum, it might attract even more traders and speculators. However, speculative bubbles can lead to rapid corrections if political outcomes don’t align with expectations, especially in a market as sensitive to news as crypto.
6. Potential for Regulatory Changes Regardless of Political Outcome: Regardless of who wins in 2024, the crypto industry may face a more established regulatory framework as governments around the world work to understand and control this space better. Even Trump’s potential return might only delay or modify—not prevent—the eventual codification of clear regulatory standards for crypto, especially as countries align on global standards.

In summary, while a Trump administration might boost Bitcoin and create short-term optimism, the crypto market’s long-term prospects will likely depend on broader regulatory trends, global economic factors, and how effectively crypto assets continue to establish themselves as hedges or alternatives to traditional investments. Would you like to delve further into any specific aspect, like historical price patterns in crypto during different administrations, or explore how institutional players might react?

SOURCE: The Guardian, Forbes

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Ilaria Vanni

Ilaria Vanni is a TV journalist for italian broadcasting and coordinator of The Meta Economist portal. She has a philosphy degree and she's now studing the economic and technological issues connected to the new frontiers of the metaverse.