Two of Trump’s cryptocurrency deals are in conflict and that could derail Bitcoin’s rally
Bitcoin investors may have a tumultuous quarter, as two conflicting cryptocurrency deals for Trump collide. Bitcoin’s price is headed for its worst week since September after concerns over President-elect Trump’s tariff plans, combined with the latest stronger-than-expected payroll numbers, caused bond yields to rise, strengthening the dollar while putting pressure on bitcoin and other risk assets. . Although the post-election crypto rally had faded by the end of 2024, investor sentiment was still optimistic heading into 2025. The promise of a pro-crypto Congress and White House outweighed any concern about macroeconomic speed bumps. First a dip, then a bounce But as investors began to understand what the first 100 days of Trump’s term could look like, it became clear that Bitcoin’s price could fall further before attempting to set the next record. Trump’s pro-crypto government may continue to support the digital asset class this year, but other aspects of his agenda could actually work against prices in the near term. “The problem with Bitcoin right now is the strong dollar,” said Zach Bandel, head of research at Grayscale Investments. “Part of that is the signal we’re getting from the Fed, that they’re going to be slower on interest rate cuts…Trump’s policy agenda is going to be positive for Bitcoin — and the tariffs are raising some new uncertainty.” At the beginning of the week, Bitcoin responded positively to a Washington Post report that the scope of the Trump administration’s tariff plans may be limited. But two days later, Trump was reportedly considering using emergency measures to implement broad tariffs. The dollar rose against most other currencies, rising further when Treasury yields touched 14-month highs on Friday. “Since the Fed cut its hawkish interest rate in December, risk-takers have become nervous and sensitive to hot data on jobs, services and prices,” said Alex Thorne, head of research at Galaxy Digital. “In addition to uncertainty over President-elect Trump’s upcoming trade and tariff agenda, risk assets are likely to face near-term volatility, although longer-term structural headwinds for Bitcoin and digital assets remain intact.” Bitcoin’s correlations with stocks and gold tend to be volatile, but it has two more consistent historical correlations: a positive correlation with global liquidity (measured in M2, a measure of the broad money supply), and a negative correlation with the dollar index. Mike Colonis, a cryptocurrency and blockchain analyst from HC Wainwright, noted last week that M2 has been trending lower since October, and that could see Bitcoin pull back into the mid-$70,000 range sometime in the current quarter. Analysts like Kenneth Worthington of JPMorgan also noted that the legislative process on Capitol Hill is slow, and that any positive impact on policy may not be felt until the end of the year. “Especially over the next three months, when Congress will primarily be dealing with non-crypto issues, the market will be more macro-driven,” Grayscale’s Bandel said. “Eventually, we will get to crypto legislation on stablecoins and market structure — we should feel confident that this Congress will address these issues — but there are big items that need to be addressed first,” such as immigration, taxes, and tariffs, he said. Bitcoin rose more than 45% in the month following the November 5 presidential election, buoyed by Trump’s pro-crypto promises and the industry spending millions of dollars to help elect the most pro-crypto Congress ever, before falling in December. “The idea that we’re going to have a pro-crypto Congress and a pro-crypto legislative environment, and that will be completely supportive of the asset class — I believe that very strongly,” Bandel added. “But aspects of Trump’s agenda could also be positive for the dollar [and] “It puts markets at risk, and tariffs are really a prime example of that.”
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2025-01-10 20:41:00
