Bitcoin’s price has rebounded after experiencing a dip following the US election. The digital asset fell nearly 3% over the weekend but has since climbed back up to $92,000. Analysts attribute this volatility to shifting perceptions of President-elect Donald Trump’s policy agenda.
Trump’s promises of a business-friendly environment have excited investors in both the stock market and the crypto market. However, concerns about inflation from potential trade tariffs and deficit spending to finance tax cuts are tempering some of the optimism. Additionally, the possibility of fewer Federal Reserve interest rate cuts in a strong US economy could affect speculative demand for digital tokens.
Despite these uncertainties, Trump has made commitments to create a supportive regulatory environment for digital assets, establish a strategic Bitcoin reserve, and position the US as a global leader in the industry. This shift in attitude towards cryptocurrencies has been welcomed by the market, with hopes for more favorable regulations and potential approval for crypto exchange-traded funds beyond Bitcoin and Ether.
JPMorgan Chase & Co strategists believe that under a Trump administration, there could be a move towards collaborative regulation of cryptocurrencies, which would benefit banks and investors. The approval of crypto legislation could pave the way for increased venture capital investments, mergers and acquisitions, and initial public offerings in the sector.
Although the prospect of a US Bitcoin reserve is seen as a low probability event, the market for spot-Bitcoin ETFs has been growing. In the week following the election, these ETFs saw a net inflow of $4.7 billion before experiencing a slight outflow. Despite the volatility, the total assets in these products remain substantial at $95 billion.
Overall, the future of Bitcoin and other cryptocurrencies seems to be closely tied to the regulatory environment and policy decisions of the incoming US administration. Investors will be watching closely for further developments and clarity on how the government plans to approach digital assets moving forward.
