The “Trump Shock” gave Bitcoin a huge boost. But will it continue?

Donald Trump is known to fuel volatility in financial markets. When he won his first election, markets soared on expectations of massive tax cuts and financial deregulation. Now, his second election victory has pushed up the prices of some assets Cryptocurrencies such as One of the main beneficiaries.

Last year, the combined value of all cryptocurrencies rose from $1.6 trillion to $3.29 trillion Bitcointhe industry’s poster child, hit a new high of just over $100,000. Cryptocurrency prices started to rise again towards the end of 2023. But the biggest gains were seen after Trump won the election after a campaign in which he promised to be a “crypto president.”

But the “Trump shock” – the rise in crypto asset prices at the end of 2024 – will soon be tested. There are big questions about whether Trump will be able to turn his major campaign promises into reality.

Trump promised a “crypto president.”

Trump announced his plans for a “crypto president” in 2024 at the annual Bitcoin conference in Nashville, Tennessee. He said it would make the United States “the cryptocurrency capital of the planet and the bitcoin superpower of the world.” “If Bitcoin is going to the moon… I want America to be the country that leads the way,” he said.

Trump also discussed creating a government strategic stockpile of bitcoin, similar to existing gold and oil stocks in the United States, and has since nominated cryptocurrency proponents to chair the committee. Security and Exchange Commission (SEC) and Treasury.

Is Trump responsible for Bitcoin rising above $100,000?

In early November 2024, just before Trump won the election, Bitcoin was trading at around $68,300. Not long after, the price rose beyond $100,000, with analysts pointing to Trump’s victory as a catalyst. Other cryptocurrencies also rose sharply, as did investments in cryptocurrency-related companies.

Trump’s endorsement and selection of crypto-friendly figures to head key departments in his administration sent a message that the US government stands behind Bitcoin, is eager to help it thrive, and does not plan to link its development to regulation. In doing so, it removed some of the fundamental concerns that had long spooked investors and kept Bitcoin out of the mainstream.

Is the rise in cryptocurrencies sustainable?

However, it remains to be seen whether Trump will be able to keep his more ambitious crypto promises and even how sincere they will be, given that the cryptocurrency industry has been the largest corporate donor in the 2024 presidential race. Just three years ago, he He condemned Bitcoin as an “anti-dollar scam,” and any decline in the value of the dollar as the world’s most important trading currency would entail a weakening of the economic power of the United States. Therefore, long-term American strategic interests may prevail.

There are concerns about Trump’s pledge to use taxpayer money to store Bitcoin. Bitcoin has no intrinsic value, its price is highly volatile, and unlike the dollar, its production and supply cannot be controlled by the US government. Although about 95% of the potential supply of Bitcoin has already been issued, it is still far from mainstream, so convincing Americans to invest in a stock could be difficult.

However, Trump himself is now investing in the cryptocurrency industry by creating cryptocurrency platform World Liberty Financial, so he may be prioritizing his financial interests with cryptocurrency-friendly policies.

What could cause cryptocurrencies to fall?

First, the “Trump Shock” was at least partly a momentum trade, so prices could fall once that momentum fades, and in fact this appears to have already begun, although the pullback has been modest so far.

There are also legitimate concerns about the long-term sustainability of cryptocurrencies. One involves their history of facilitating crime. The other reason is the high cost of producing it and the huge amounts of energy it consumes. Many argue that other technologies, including artificial intelligence, are more deserving of our limited energy supplies.

While the high-tech decentralized financial system holds a lot of appeal and potential value, cryptocurrencies have yet to deliver on their promises. Cryptocurrencies have been around for years, but their practical use is still very limited, fueling the argument that they are purely speculative instruments with no intrinsic value.

Bottom line

Donald Trump’s electoral ambition and tendency to prioritize his own business interests have been great for the cryptocurrency industry and its growing group of investors. However, there are a number of reasons to be skeptical about the sustainability of the “Trump shock” even in the near term. Election campaign promises are cheap. Making the United States the “crypto capital of the planet” will not be.