(Bloomberg) — Bitcoin recovered from its biggest two-day retreat because the US 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 almost 3% over Saturday and Sunday before rising back to $92,000 as of seven:05 a.m. Monday in London. Trump has made various pro-crypto pledges but there are open questions on the timetable for implementation and whether all are feasible — corresponding to organising a US Bitcoin stockpile.
Bitcoin became “overheated” after a record-breaking advance since Election Day on Nov. 5, and “a whole lot of excellent news has been built into the value,” IG Australia Pty Market Analyst Tony Sycamore wrote in a note.
Inflation Risks
While Trump’s business-friendly stance has enlivened US equity and crypto investors alike, a few of the optimism is being tempered by inflation risks from the prospect of trade tariffs and deficit-spending to fund tax cuts.
Investors are scaling back expectations for Federal Reserve interest-rate cuts in a solid US economy, a possible hurdle for crypto since liquidity conditions can influence speculative demand for digital tokens.
Trump has vowed to create a friendly regulatory framework for digital assets, arrange a strategic Bitcoin stockpile and make the US the industry’s global hub. A onetime crypto skeptic, the president-elect modified tack after digital-asset firms spent heavily during election campaigning to advertise their interests.
Regulation Shift
Crypto laws could also be approved soon under a Trump administration, spurring a shift away from regulation by enforcement to a more collaborative approach, JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou wrote in a note.
Banks could enjoy greater scope to interact with digital assets, the team said, and markets are more hopeful of approval for crypto exchange-traded funds investing in tokens apart from just the highest two, Bitcoin and Ether.
Regulatory clarity could be a tailwind for enterprise capital investing, mergers and acquisitions and initial public offerings, in response to the strategists. However the establishment of a US Bitcoin reserve is a “low-probability event,” they added.
US spot-Bitcoin ETFs attracted a net inflow of $4.7 billion from Nov. 6 to Nov. 13, the day the unique cryptocurrency set an all-time peak of $93,462, data compiled by Bloomberg show. About $771 million exited the products over Thursday and Friday, leaving the group with total assets of $95 billion.