Trump's election as the new president of the United States became the biggest political and economic topic of November. Unsurprisingly, the impact of Trump's ascension is enormous, as his distinct 'Trump 2.0' economic policy direction and strong support for cryptocurrencies have reversed previous market trading logic. Stock market liquidity began to flow into more sectors, and the crypto market frenzy is closely related to Trump, all signaling the emergence of a new trading logic system.
With the conclusion of the U.S. elections, Trump was re-elected as president, becoming the 47th president of the United States. Thus, the election has concluded, and the U.S. will return to a right-leaning development philosophy, alleviating global traders' concerns about election risks.
As traditional conservatives, the Republican Party advocates for tax cuts, revitalizing manufacturing and traditional energy industries, reducing government regulatory power, and deporting illegal immigrants, while 'Trump 2.0' further implements the 'MAGA Party' policy concept.
From a policy perspective, Trump's policy thinking is very similar to that of Reagan's era, both advocating a combination of 'loose fiscal policy + deregulation + trade protectionism.' Reagan, at the time, led the U.S. out of the stagflation following the oil crisis, driving economic recovery and ultimately achieving the 'Reagan cycle,' which continued to influence subsequent U.S. economic policies. Whether Trump can replicate Reagan's 'successful' path and pull the U.S. economy back from the edge of stagflation has become the most focused point of his term.
The similarity between Trump's policies and Reagan's policies may become the main trading logic for the subsequent 'Trump trade', which investors can continue to monitor.
Returning to the inflation data and Federal Reserve policy in November. On November 26, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) meeting held on November 6-7. The minutes indicated a 25 basis point rate cut in November, in line with expectations. At the same time, the Federal Reserve emphasized that 'participants expect that if the data aligns with expectations and inflation continues to decline to 2%, with the economy remaining close to maximum employment levels, a gradual shift towards a more neutral policy stance may be appropriate over time.' This 'more neutral policy stance' means that the Federal Reserve will no longer deliberately pursue interest rate hikes or cuts, but will adjust based on the state of the market economy, which undoubtedly suggests the Federal Reserve has concerns about the U.S. economy emerging from recession and optimistic expectations for future recovery.
In November, the U.S. stock market operated steadily, making small incremental breakthroughs to historical highs. In the AI sector, although Nvidia (NVDA) reported third-quarter earnings that exceeded expectations, the absence of 'excessive outperformance' led to a 5% drop in after-hours trading on the day of the report. The current market attitude towards AI seems to be 'as long as it's not overly explosive, it's considered below expectations.'
Since Trump's election, Bitcoin has galloped like a wild horse, heading straight for $100,000. Market FOMO sentiment is severe, only easing slightly in the last week of November. Against the backdrop of Trump shouting 'Bitcoin strategic reserves,' Pennsylvania first passed the Bitcoin Rights Bill, and the market seems to have ushered in the 'Trump era' for cryptocurrencies, which are becoming subjects of legislative protection in the traditional world and are truly entering people's lives.
If Trump's election brought Bitcoin to new heights, then Musk has completely ignited the MEME track. With Musk joining the 'Trump 2.0' government team, three Musk concept coins surged violently. Behind this small episode is a longer narrative: Musk, as a leader in technological innovation, may accelerate the advancement of crypto technology, such as promoting the integration of AI and blockchain.
Thus, cryptocurrencies undoubtedly replaced AI as the new darling of the stock market in November, and people naturally sought opportunities related to cryptocurrencies in the secondary U.S. stock market. Among the Bitcoin frenzy throughout November, the biggest winner that emerged was MicroStrategy (MSTR) — MicroStrategy's stock price saw a maximum increase of over 140% in November.
Source: StockCharts.com
MicroStrategy originally started as a niche software company founded in the 1990s. After surviving the tech bubble of 2000, it entered a stable business period but had little room for major growth until CEO Michael Saylor became a Bitcoin believer around 2020, integrating Bitcoin as a core strategy into the company's balance sheet. He successfully built a 'Bitcoin-driven' corporate growth logic: Bitcoin occupies a significant proportion of the company's assets, and its value fluctuations directly impact the company's value. As Bitcoin prices rise, MicroStrategy's stock price surges due to increased assets, with daily trading volume surpassing Nvidia. By leveraging capital operations, the company issued new shares to raise $4.6 billion and reinvested all of it into Bitcoin, driving up Bitcoin prices and creating a cycle of buying Bitcoin - stock price increase - leveraging or issuing more shares to buy more Bitcoin, thus closely linking shareholder interests with Bitcoin appreciation. The unexpected surge in MicroStrategy's stock price essentially reflects that some investors view it as an indirect way to hold Bitcoin and are willing to pay a premium for it.
Bitcoin made MicroStrategy successful, and MicroStrategy also made Bitcoin successful. Its aggressive bond issuance and stock sales to buy Bitcoin, along with its high-profile market presence, propelled Bitcoin's rise from $70,000 to $90,000, similar to how Bitcoin ETFs boosted Bitcoin from $40,000 to $70,000. Therefore, MicroStrategy is also considered the biggest driver of this round of Bitcoin's rise from $70,000 to $90,000.
Some investors believe that MicroStrategy has cleverly discovered a method to exploit loopholes in the fiat currency system, fully utilizing the inefficiencies of traditional capital markets to gain leverage against fiat currency, and perfectly integrating this with the predictability of Bitcoin, thereby endowing itself with significant upside potential. In short, it is about using cheap and constantly expanding capital to acquire scarce assets with appreciation potential. Of course, this logic assumes that Bitcoin will inevitably succeed in the long term. As of the latest data, MicroStrategy currently holds 279,420 Bitcoins.
MicroStrategy's 'digital gold standard' strategy and capital operation model provide us with a new experimental paradigm. If market conditions continue to rise, this model could become an industry pioneer, guiding other companies to adopt similar strategies, accelerating the adoption of Bitcoin in corporate balance sheets, and promoting Bitcoin as a top predator recognized as an asset.
The market's rise has long led retail investors to sell Bitcoin in pursuit of high returns from so-called meme coins, and Bitcoin is now the main battlefield for whales. Some believe that the greatest risk to Bitcoin currently comes from whale sell-offs. As one of the largest whales, MicroStrategy's biggest sell-off risk lies in forced liquidation of bonds due to falling Bitcoin prices, leading to a self-reinforcing decline in Bitcoin prices.
However, this argument ignores the bond structure of MicroStrategy. The bonds issued by MicroStrategy are convertible bonds, which belong to off-market leverage. Even if MicroStrategy cannot repay its debts on the repayment date three years later, creditors can only convert the bonds into stocks and dump them in the stock market, which does not shake Bitcoin's price. Therefore, instead of worrying about MicroStrategy being forced into liquidation and selling coins to repay debts, it is better to worry about those buying MicroStrategy stocks in the U.S. stock market.
Investor Victor Dergunov has clearly pointed out that while MicroStrategy has demonstrated forward-looking insights, its stock is clearly in overbought territory and can be seen as a typical example of the entire crypto space bubble. Bitcoin is far from reaching its peak, but reality has already sounded the alarm, reminding us what happens when the market heats up too quickly. The market's valuation of MicroStrategy is likely to reach a clearer consensus, and this valuation should be significantly lower than its current level.
Certainly, a more anticipated future is that we may see Bitcoin securing a place on the balance sheets of thousands of companies, with MicroStrategy being recorded in history as a financial pioneer of its time.
In November, under the backdrop of Trump's election as president, the economy exhibited multi-dimensional changes. The FOMC meeting cut rates by 25 basis points, and there is a high probability of continued easing in December, injecting liquidity expectations into the economy. The formation of Trump's economic team is expected to replicate the previous high-growth economic path. The U.S. stock market continued to rise to new highs, and the crypto market celebrated under Trump’s favorable policies, with Bitcoin approaching $100,000. MicroStrategy emerged prominently due to its Bitcoin holdings and innovative capital operation experiments. Looking ahead, attention needs to be paid to the implementation strength and rhythm of Trump's policies, as well as the impact of rate cuts on economic structure. If Trump's commitments to the crypto industry can be partially realized, $100,000 may not be the endpoint for Bitcoin's price, but merely a milestone in its upward journey. The road is winding, but the future is bright.
