1. Introduction
Recently, the Bitcoin and cryptocurrency markets have experienced a new round of explosion, one important driving factor being the so-called 'Trump Trade' effect. Bitcoin has broken through key historical resistance levels in a short time, indicating a strong rebound in the crypto market and showcasing the continued preference of global investors for digital assets in an uncertain macro environment. This report will delve into the direct and indirect impacts of the 'Trump Trade' on the cryptocurrency market, exploring the market sentiment changes, price volatility, and potential future trends it may bring. We will comprehensively assess the future trajectory of Bitcoin and other crypto assets and the potential risks in the market by integrating macroeconomic data, policy background, market sentiment, and other factors.
2. Analysis of Macro Economic Background: The Multiple Driving Forces of the Crypto Bull Market
2.1 Global Economic Slowdown and the Safe-Haven Attributes of Crypto Assets
Global economic growth has continued to slow since 2023, especially after the Federal Reserve's series of interest rate hikes, which have limited liquidity in the dollar and overall capital market liquidity has declined. In the context of slowing economic growth, global investors are more inclined to allocate to safe-haven assets, and Bitcoin, due to its decentralized and anti-inflation characteristics, is gradually being viewed as 'digital gold'. In 2024, the crypto market is entering a new bull market cycle, closely related to the increasing demand for global safe-haven assets.
This safe-haven attribute of cryptocurrencies stems from their low correlation with traditional markets. Especially after Trump became active on the political stage again, his public statements supporting cryptocurrencies have instilled confidence in the market, prompting investors to incorporate Bitcoin as a 'safe-haven asset' in their portfolios during uncertain economic conditions, thereby driving up Bitcoin's price.
2.2 Policy Changes by the Federal Reserve and Currency Depreciation
The Federal Reserve's interest rate policy has a profound impact on the crypto market. After the pandemic, the Fed has raised rates multiple times to control inflation; however, in 2024, as the pace of rate hikes slows, market expectations for rate cuts have increased. The volatility of the dollar index and the trend of dollar depreciation have led investors to turn to cryptocurrencies to avoid the long-term depreciation risks of the dollar.
In this context, Bitcoin's scarcity and borderless nature attract global capital inflows. Particularly under Trump's influence, demand for Bitcoin in the U.S. market has experienced a new wave of growth. The linkage between the U.S. economy and dollar depreciation has prompted investors from other countries to flock to the Bitcoin market to avoid the risks of their national currencies depreciating. Moreover, the Federal Reserve may continue its loose monetary policy in the future, benefiting the crypto market.
2.3 Long-term Threat of Inflation and the Anti-inflation Properties of Cryptocurrencies
As the global economy recovers, inflation continues to rise. The fixed supply, scarcity, and decentralized nature of cryptocurrencies make them increasingly attractive for investment in the context of rising inflation. Particularly Bitcoin, with its constant total supply, serves as an 'insurance' against inflation, providing a unique value preservation function compared to traditional assets.
Trump's public support further reinforces this characteristic. Amid increased political uncertainty in the U.S. and persistent inflationary pressures, Bitcoin's anti-inflation characteristics lead more institutional and individual investors to view it as a long-term investment option. As demand for anti-inflation assets increases globally, Bitcoin is expected to become an important hedging tool in the new bull market cycle.
3. The Direct Impact of Trump's Trades on the Crypto Market
3.1 Interpretation and Origin of the 'Trump Trade' Concept
'Trump Trade' is a term that first emerged during Trump's presidency, where his policies and rhetoric frequently triggered fluctuations in capital markets, causing rapid changes in the financial market's sentiment. Trump's economic policies, attitude towards the Federal Reserve, and public stance on digital assets all influence investors' risk appetite. Currently, Trump's comments supporting cryptocurrencies have reactivated this effect, leading investors to generally believe that his statements have played a significant role in boosting Bitcoin's price.
In the new round of market fluctuations, the 'Trump Trade' effect is highlighted, and Bitcoin's volatility increases. Trump's supportive stance on crypto assets has not only attracted enormous market attention but also brought more traditional and new investors into the market. Under Trump's influence, price fluctuations in the crypto market have become more frequent, bringing greater investment opportunities.
3.2 Changes in Market Sentiment: From Wait-and-See to Chasing Gains
The changes in market sentiment brought about by Trump's comments are particularly evident. From his first statement, Bitcoin's price quickly broke through important resistance levels in the short term, prompting many investors who were on the sidelines to accelerate their market entry. Market sentiment shifted from wait-and-see to chasing gains, with FOMO (fear of missing out) sentiment driving up Bitcoin's price.
At the same time, the sentiment index of the cryptocurrency market shows that as Trump's related comments increase, market optimism has reached an annual high. Investors not only view Bitcoin as a short-term profit tool but also as a long-term means to hedge against future policy uncertainties and protect personal assets. This change in sentiment has triggered capital flows, further driving up Bitcoin's price.
3.3 Profound Impact on the Crypto Ecosystem
Trump's supportive attitude towards cryptocurrencies not only impacts Bitcoin's price but also stimulates the development of the entire crypto ecosystem. Particularly in emerging fields such as NFTs, DeFi, and Web 3.0, Trump's comments inject new momentum into investor confidence. These innovative sectors, due to their decentralized and risk-resistant properties, attract significant attention from capital and developers, boosting overall market activity. Especially in the NFT sector, with the Trump family launching cryptocurrency-based projects, NFT trading volumes have significantly increased. The expansion of the NFT market benefits mainstream crypto assets like Bitcoin and Ethereum while enhancing the liquidity of the entire crypto ecosystem, aiding in the market's long-term development.
4. Analysis of Different Stages of the New Bull Market Cycle
4.1 Early Bull Market: Institutional Entry and Price Driving
In the early stages of the bull market, the influx of institutional investors is the main driving force behind the market's rise. Stimulated by comments related to Trump, many institutional investors increased their Bitcoin holdings, significantly enhancing market liquidity. According to statistical data, the proportion of funds from institutional investors has risen sharply, indicating that Bitcoin is gradually entering the investment portfolios of traditional investors. Compared to the past, the institutional holdings in this round of the bull market are more stable, especially driven by the entry of large investment funds, hedge funds, and pension funds, which has led to more stable price fluctuations for Bitcoin. The entry of institutions not only increases market depth but also reduces Bitcoin's volatility, enhancing market maturity.
4.2 Mid-Bull Market: FOMO Effect and Retail Entry
The mid-stage of a bull market is usually accompanied by an amplification of the FOMO effect. Driven by institutional investors, the attention of retail investors has sharply increased. Especially against the backdrop of Trump's frequent media headlines, many retail investors quickly entered the market to share in the bull market's dividends. The changes in the market sentiment index clearly reflect this phenomenon. Market activity has significantly increased, and trading volumes have reached historic highs. The discussion volume about cryptocurrencies on various social media platforms continues to rise, particularly after Bitcoin consistently breaks through psychological resistance levels, with FOMO sentiment driving retail entry. In the context of heightened market sentiment, prices have quickly soared.
4.3 Late Bull Market: Risk Control and Rational Investment
In the later stages of the bull market, market volatility may intensify, and risk appetite may decrease. At this point, some investors who entered the market at high prices may gradually reduce their holdings, leading to fluctuations in market sentiment. Meanwhile, government regulatory policies and market adjustment pressures may also affect prices. Although Trump supports cryptocurrencies, investors need to remain cautious to guard against high-level risks.
At this stage, the market often experiences volatility, and investors should enhance risk control. The reduction of holdings by institutional investors in the later stages of the bull market can also trigger price volatility. During the market's turning point, investors should adopt prudent strategies to minimize risks.
5. In-depth Analysis of Policy Risks
Trump's supportive attitude towards cryptocurrencies brings positive signals to the market, but the legal status and compliance of cryptocurrencies still face risks.
5.1 U.S. Regulatory Dynamics
Despite Trump's support for cryptocurrencies, regulatory agencies such as the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) remain cautious about crypto assets. The regulatory measures taken by these agencies have far-reaching impacts on price fluctuations in the crypto market. Especially regarding the approval of Bitcoin spot ETFs, the SEC's stance will directly affect market liquidity and prices. Changes in regulatory agencies' attitudes towards crypto assets may affect market sentiment, leading to price adjustments.
5.2 Global Policy Risks
Besides the U.S., regulatory policies in other countries also significantly impact the market. For example, China and the European Union have relatively strict attitudes towards cryptocurrencies. Changes in various countries' policies can lead to capital flows and increase market volatility. Under Trump's influence, the U.S. may relax its policies, but the positions of other countries also need close attention.
6. Conclusion: The Prospects of the New Bull Market and Investors' Response Strategies
In 2024, amid increasing global economic uncertainty and a reshuffled U.S. political landscape, the 'Trump Trade' effect injects new momentum into the Bitcoin market. The breakthrough in Bitcoin prices and the onset of the bull market cycle bring abundant opportunities to the market but also escalate risks. Macroeconomic factors, Federal Reserve policy dynamics, inflation trends, and global regulatory policies are all key variables influencing the future market.
Through a detailed analysis of the current market, it is evident that although Bitcoin's anti-inflation and safe-haven attributes have been fully leveraged in this round of the bull market, the driving forces and challenges of this bull market are more complex and diverse than before. Whether it is the entry of institutions or the FOMO sentiment of retail investors, both can amplify potential market bubble risks during market rises. Therefore, when investing in Bitcoin and other crypto assets, investors need to adopt cautious strategies and closely monitor market signals to ensure returns while effectively controlling risks.
7. Future Investment Suggestions: Diversification Strategies and Risk Management
Based on the macro analysis of this bull market, the following strategic suggestions are provided for investors:
7.1 Long-term Investment Strategy: Maintain Rationality and Patience
For long-term investors optimistic about Bitcoin's value, accumulating positions in a staggered manner during the early and mid-stages of the bull market is a relatively prudent choice. Especially under the potential impetus of Trump's supportive policies for cryptocurrencies, favorable policies in the near future will further enhance Bitcoin's market attractiveness. Long-term investors should remain patient during market adjustments and consider the medium to long term as their investment cycle, avoiding frequent trading due to short-term fluctuations.
7.2 Mid-term Strategy: Seize Swing Opportunities, Set Take-Profit and Stop-Loss
In the mid-stage of the bull market, when price increases occur frequently, investors can adopt a swing trading strategy. Utilizing the ups and downs of the market for buying and selling can achieve periodic gains. However, caution should be exercised regarding the risks posed by severe market fluctuations, and it is recommended to set clear take-profit and stop-loss levels for each trade to prevent potential losses from changes in market sentiment.
7.3 Risk Management: Focus on Policy Changes and Adjust Positions
Policy uncertainty has always been a source of risk in the cryptocurrency market. Although Trump's attitude may be favorable to the crypto market, future regulatory policies still carry the risk of change, especially scrutiny from the SEC and other international regulatory agencies. Therefore, it is recommended that investors stay alert to policy changes, maintain an appropriate cash position, and adjust their positions flexibly to respond to sudden policy risks.
7.4 Diversification of Investment Portfolios: Balancing Traditional Assets and Crypto Assets
In this round of the bull market, although Bitcoin's characteristics as a safe-haven asset are gradually being recognized, its high volatility cannot be ignored. Investors should avoid putting all their funds into the cryptocurrency market, but instead balance crypto assets and traditional assets through diversified asset allocation to improve the overall risk resilience of their investment portfolio. Traditional market safe-haven assets like bonds and gold can serve as hedging tools to reduce overall risk posed by the volatility of crypto assets.
8. Summary and Outlook: The Brightness and Concerns of the New Bull Market
Overall, in 2024, the Bitcoin market is experiencing the outbreak of a new bull market driven by Trump's support and changes in the global economic environment. Bitcoin's positioning as 'digital gold' is increasingly established, attracting a large number of institutional and individual investors, and the depth and breadth of the crypto market are gradually expanding. During this new bull market cycle, the market exhibits unprecedented vitality, and it is expected that under favorable policies and a tightening global economy, the bull market may last for a long time.
However, the prosperity of the market often also signifies an increase in risks. Investors should be aware of the high volatility of crypto assets and the uncertainty of policies, and avoid blindly chasing gains due to market upswings. In the future, investors need to seek a balance between market sentiment and the macro environment, achieving long-term stable returns through rational allocation and prudent operations.
The arrival of the new bull market brings unprecedented opportunities to the cryptocurrency market, but successful investment relies on a deep understanding of market trends and prudent risk management. In a market environment where opportunities and challenges coexist, only stable and cautious investment strategies can grasp the true long-term value in the ever-changing crypto market.
