As Trump continues to appoint crypto-friendly agency heads, from the Secretary of Commerce to the widely criticized SEC Chairman Gary Gensler resigning, it is expected that the new SEC appointed by the Trump administration will fully relax restrictions on the cryptocurrency industry. Wall Street believes that policy is a significant positive for Bitcoin, consistent with our previous report mentioning that 'personnel matters' drive up Bitcoin prices.
However, the increase in other small and medium-sized cryptocurrencies is not as significant as Bitcoin's, as institutional investors are behind the purchase of Bitcoin spot ETFs. Wall Street is said to be frantically chasing Bitcoin prices. According to Farside data, there was net capital inflow for all five trading days last week, with Thursday reaching as high as $100 million, showing an impressive increase. Undoubtedly, last week's astonishing increase was driven by the rise in Bitcoin spot ETF prices, meaning that most of the market increase came from institutional investors' frenzied investments, while retail investors were relatively calm.
Not only Bitcoin itself but also related concept stocks have seen astonishing rises, among which MicroStrategy's stock price is particularly alarming, constantly climbing to new highs. This company's stock price has soared over 500% in 2024, but last week it was shorted by Citron Research, leading to a drop of more than 16%.
Citron Research pointed out on Thursday in the X community that although the institution is long-term optimistic about Bitcoin and MicroStrategy's Bitcoin layout, the company's stock price increase has 'completely diverged from Bitcoin's fundamentals,' raising doubts about the sustainability of this stock price surge. Despite the trading market currently being very good, there seems to be almost no risk in the cryptocurrency market from the perspectives of the overall economy, interest rate policies, news, or policy environment.
Research reports also point to Bitcoin continuing to rise, and researchers are very optimistic about the outlook for the cryptocurrency market, indicating that Bitcoin will stabilize at $100,000, and this year it may even aim towards $110,000. However, Bitcoin unexpectedly experienced a pullback just $200 away from $100,000, dropping further below $96,000 early this morning (25).
Is there really no risk in the cryptocurrency market now? Let's start with the most conventional question of whether the interest rate policy might pause rate cuts, then move on to the presidential inauguration next year, and briefly discuss the short and medium-term risks in the cryptocurrency market.
Sources: MICA RESEARCH
A. On November 19, Paul Tudor Jones significantly increased his Bitcoin holdings, reaching a new high.
Renowned investor Paul Tudor Jones stated as early as October that U.S. fiscal issues would drive Bitcoin prices up. He has also significantly increased his investments in Bitcoin-related financial instruments. According to documents submitted to the SEC on November 14, as of September 30, his company Tudor Investment Group held BlackRock's IBIT shares, increasing by 400% from 869,565 shares in the second quarter to 4,428,230 shares.
Analysis indicates that Bitcoin may now have become the largest non-options position in Jones' investment portfolio, surpassing the SPDR S&P 500 ETF (SPY) valued at $208 million and NVIDIA (NVDA) shares valued at $166 million. This increase occurred during the summer when Bitcoin's price remained relatively stable, as major market players generally increased their Bitcoin holdings, and with Bitcoin soaring before and after Trump's election victory, this investment has brought him substantial returns.
Paul Tudor Jones has always been a long-term supporter of Bitcoin. In May 2023, he expressed a preference for this asset, believing that its fixed supply characteristics are unique and publicly stated that he would maintain a small position. In October 2024, he further supported Bitcoin and expressed optimism about gold and commodities, and institutional investors have already reacted by continuously increasing their Bitcoin holdings.
B. On November 20, Trump appointed crypto supporter Howard Lutnick as U.S. Secretary of Commerce.
The topic of Trump's appointments has become a hot topic in the recent trading market, and the crypto community is also looking forward to Trump introducing more crypto-friendly candidates. According to reports from November 19, U.S. President Donald Trump is expected to choose Cantor Fitzgerald CEO Howard Lutnick to serve as Secretary of Commerce, who has long been a supporter of cryptocurrencies. His company Cantor Fitzgerald has managed the U.S. Treasury portfolio of the stablecoin Tether since 2021.
The responsibility of the Secretary of Commerce is to promote the development of U.S. business domestically and internationally and to serve as a member of the president's cabinet. Howard Lutnick is currently the co-leader of Trump's transition team and will replace the current Secretary of Commerce Gina Raimondo. He has repeatedly expressed confidence in Tether's financial health, is also a supporter of Bitcoin, and has criticized U.S. regulators for their ignorance of cryptocurrencies, emphasizing that Bitcoin is a commodity, not a security.
This personnel case will promote further development of cryptocurrency in the United States, pushing Bitcoin's daily increase to 2%, with the price rising to a peak of $93,000, before retreating to $92,000. If the future Trump administration leans towards 'crypto-friendly' candidates in personnel matters, it is expected to allow the crazy market to continue a bit longer.
C. On November 22, SEC Chairman Gary Gensler confirmed he would resign, and Bitcoin soared to $99,000.
The SEC officially announced that Chairman Gary Gensler will resign on January 20, 2024, allowing President-elect Trump to immediately appoint a new chairman. He has led the SEC since 2021, pushing for several controversial reforms, including strengthening cryptocurrency regulation. The outside world expects the new chairman to be more friendly towards Wall Street and cryptocurrencies.
Although the SEC chairman's term is five years, theoretically Gary Gensler could remain in office until 2026, but he chose to resign early. During his tenure, the SEC has had multiple conflicts with the cryptocurrency industry, including lawsuits to prevent Grayscale from launching a Bitcoin spot ETF, which ultimately won in court and attracted significant capital inflow.
Additionally, the SEC has taken legal action against several crypto companies such as Coinbase, with mixed results. During his tenure, he also had a tense relationship with Tesla CEO Elon Musk, launching an investigation into his $44 billion acquisition of Twitter, and demanding sanctions for Musk's non-compliance with a settlement agreement. With his departure and the impending expiration of two commissioners' terms, Trump will have the opportunity to reshape the SEC, causing Bitcoin to surge to $99,000, officially knocking on the door of $100,000.
The biggest potential risk in the market - 'the U.S. economy falling into recession'
To analyze the risks in the crypto market, we would like to first discuss whether there is a possibility of pausing interest rate cuts or reversing easing policies. Currently, we do not see a possibility of a shift. Firstly, the price index is no longer a focus, and the decline in inflation has already become a confirmed and persistent trend. The health of the job market is now the Fed's focus because the U.S. tourism industry enters the traditional off-season in winter, and job creation does not have strong momentum. Maintaining employment stability is the primary task.
At this time, the 'rate cut speed' becomes critical, considering that the Fed will soon enter a rate-cutting cycle and that the new quarter's earnings reports from U.S. stocks have not been as good as expected. The actual purchasing power in the U.S. is not as strong as imagined, and the current increase is merely a result of the capital flowing back to the U.S. after Trump's election, which has shifted towards stocks, creating an inflated stock price state.
In fact, the U.S. economy is no longer as resilient as in previous quarters, as evidenced by the Fed's recent rate cut policies. The last FOMC decision on rate cuts was unanimously approved by all members, making it foreseeable that the Fed will almost certainly cut rates by one basis point each quarter. This means that there is currently no risk from interest rate policies, and the authorities will only gradually cut rates.
When the market no longer expects the Fed to reverse interest rate policies, the cryptocurrency market also surged in line with this expectation. However, the zero-risk interest rate is insufficient to drive Bitcoin to such high increases. The real driving force behind it is the imminent relaxation of cryptocurrency industry policies by Trump's administration. Gold was also a hot investment product not long ago, but now its increase has far behind Bitcoin, and investors are overly expecting the Trump administration to open up the cryptocurrency options market or high-leverage tools.
This refers not only to Bitcoin but also to the possibility that competing coins may be excluded as securities and opened for trading, thus supporting the astonishing rise of the cryptocurrency market. In this situation, institutional investors are choosing to buy Bitcoin to keep up with the potential relaxation of cryptocurrency industry policies by the Trump administration on January 20.
In this context, we believe that more attention should be paid to risks and a more conservative strategy should be adopted to cope with an overheated market. Currently, the biggest risk in the investment market is just one - 'U.S. economic recession.' Now that the U.S. elections are over, the government does not need to beautify employment data through large-scale spending.
If the U.S. really falls into recession, even continuous rate cuts will not save the market. We can refer to the rapid rate cuts in 2020 that led to a major cryptocurrency crash. At that time, it is very likely to be a turning point for Bitcoin prices, and the timing of such an occurrence is difficult to predict. We suggest that investors moderately adjust their investment positions to diversify risks, and it is not advisable to excessively bet on the market right now.
Last week's review: [MICA RESEARCH] The market is overly crazy, cryptocurrency investors can adjust moderately.
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"[MICA RESEARCH] Is Bitcoin still expected to break the $100,000 barrier? What risks does the market have?" This article was first published on (Block客).
