Author: Ben Strack, Blockworks; Translated by: Wuzhu, Golden Finance
As you know, November was an eventful month for cryptocurrencies – fueled by Donald Trump’s election victory.
Bitcoin rose 37.3% last month, according to CoinGlass. That was the asset’s best performance since November 2020 (Bitcoin’s highest average return month, at 46%), when it rose 43%.
Looking ahead, December has not historically been the best month for BTC (average return of +4.9%). In December 2020 (also after the presidential election), the price of Bitcoin rose by 47%; but from 2021 to 2023, the asset has returned -18.9%, -3.6%, and +12.2%, respectively.
Bitcoin has struggled to break the $100,000 level, with some analysts attributing this to profit-taking by investors and resistance from traders hedging against potential downturns with put options.
Jeff Embry, Managing Director of crypto hedge fund Globe 3 Capital, noted that he does not believe specific developments this month will impact the crypto market. Instead, he predicts that U.S. stimulus will result in sustained cryptocurrency demand starting in November, “freeing innovators, risk-takers, and investors from constraints and telling them ‘We support you now’.”
“The latest peaks for BTC and ETH before November were in mid-March,” he explained. “This was an eight-month consolidation period in a bull market, so the market is ready for the catalysts that will drive new highs, and the November elections provide such a catalyst in a huge way.”
Globe 3 Capital's year-end BTC price prediction (announced in early 2024) is $124,000 — Embry noted that the firm has consistently held this number. Some others pointed out that $80,000 is a support level in the case of a pullback.
“Of course, higher prices depend on higher demand, and we see comprehensive demand from retail investors, [high net worth individuals], institutions, sovereign wealth funds, and the government itself,” Embry added.
We certainly saw many companies buying Bitcoin in exchange for government bonds in November. This situation seems likely to continue.
A document submitted on Monday showed that MicroStrategy purchased 15,400 Bitcoins for about $1.5 billion in cash from November 25 to December 1. Bitcoin miner Marathon Digital (also today) revealed it plans to issue $700 million in convertible senior notes — the proceeds will be primarily used to buy more Bitcoin.
MicroStrategy founder Michael Saylor shared a video explaining why Microsoft should hold Bitcoin on its balance sheet. Such a proposal was raised at the shareholder meeting on December 10; although the board suggested voting against it (noting that it had considered the issue), it is something to watch.
Then there is the Federal Reserve's interest rate decision on December 18. Multiple market odds indicate that the market expects a 25 basis point rate cut (with a 67% probability). Rate cuts have historically been favorable for risk assets like Bitcoin.
Finally, the industry continues to await clarity on a possible U.S. Bitcoin strategic reserve. In terms of Embry's view that the government is showing interest, U.S. support for this could lead more countries to follow suit.
But analysts at Compass Point Research & Trading believe the likelihood of the (Bitcoin Act) proposed by Senator Cynthia Lummis becoming law is less than 10%.
“We expect that the Republican-controlled Congress will not appropriate funds for this purpose, focusing instead on expiring tax provisions and the federal budget,” wrote Joe Flynn and Ed Groshans. “The main challenge this action will encounter is the deficit financing of Bitcoin purchases.”
They added that while Trump could issue an executive order (perhaps establishing a sub-account in the Treasury's general fund), a future government might revoke this action.
What’s the bottom line? As the weather becomes increasingly cold for many of us, the story of cryptocurrency continues to heat up.
