(Bloomberg) — Bitcoin recovered from its biggest two-day decline since the U.S. election in choppy trading that reflects shifting assessments of the impact of President-elect Donald Trump’s policy agenda.
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The digital asset fell nearly 3% over Saturday and Sunday before rising again to $92,000 as of 7:05 a.m. Monday in London. Trump has made several pro-crypto pledges, but there are open questions about the timeline for implementation and whether they are all possible — such as creating a US stock of Bitcoin.
Bitcoin has become “overheated” after a record advance since Election Day on November 5, and “a lot of good news has been baked into the price,” Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note.
Inflation risk
While Trump’s pro-business stance has energized investors in US stocks and cryptocurrencies alike, some optimism has been dampened by inflation risks stemming from the prospect of trade tariffs and deficit spending to finance tax cuts.
Investors are reducing their expectations for interest rate cuts by the Federal Reserve in a strong US economy, a potential hurdle for cryptocurrencies because liquidity conditions could affect speculative demand for digital tokens.
Trump pledged to create a friendly regulatory framework for digital assets, create a strategic stockpile of Bitcoin, and make the United States a global hub for the industry. The president-elect was previously skeptical of cryptocurrencies, but changed his stance after digital asset companies spent large sums of money during the election campaign to advance their interests.
Organizational transformation
Cryptocurrency legislation may soon be approved under the Trump administration, spurring a shift away from regulation by enforcement to a more collaborative approach, strategists at JPMorgan Chase & Co. led by Nikolaos Panigirtzoglou wrote in a note.
The team said banks could have greater scope to deal with digital assets, and markets are more optimistic about approving cryptocurrency ETFs to invest in tokens other than just two, namely Bitcoin and Ethereum.
Regulatory clarity will be a tailwind for venture capital investment, mergers and acquisitions and IPOs, according to strategists. They added that the creation of a Bitcoin reserve in the United States is a “low-probability event.”
U.S. spot bitcoin ETFs attracted a net inflow of $4.7 billion from Nov. 6 to 13, the day the original cryptocurrency hit an all-time high of $93,462, data compiled by Bloomberg showed. About $771 million worth of products exited over the course of Thursday and Friday, leaving the group with total assets of $95 billion.
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