Elected President Trump supports the development of cryptocurrency in the U.S. After his election, Bitcoin entered a new bull market and reached a historic high on December 17.
The good times did not last long; after a surge of emotional buying, Bitcoin's market has recently turned sharply, likely recording its first monthly decline in four months in December. Some market participants believe that Trump's promises regarding cryptocurrency during the election may be difficult to fulfill.
Bitcoin will record its first monthly decline in four months.
In the last days of this record-breaking year for cryptocurrency, Bitcoin's rally suddenly lost momentum. Public data shows that after reaching a historic high of $108,316 on December 17, Bitcoin fell to the $95,000 level last Friday, a decline of nearly 3% from the previous trading day. By noon on the 30th, Bitcoin futures further dropped to $94,128. Other cryptocurrencies, including Ethereum and Dogecoin, are also in a downward trend. This will mark the first monthly decline for Bitcoin in the past four months.
Previously, although the Federal Reserve lowered interest rates again in the December rate decision, it hinted that there would only be two rate cuts next year, and Bitcoin immediately reacted by pulling back. Tony Sycamore, an analyst at market institution IG Australia Pty Market, wrote in a report, "The results of the Federal Reserve meeting should not surprise investors who are focused on the recent easing of U.S. inflation and economic activity data; however, it acted as a catalyst that swept away some of the excessive speculative behavior flowing into risk assets (including stocks and Bitcoin) after the U.S. elections." Furthermore, during the post-meeting press conference, Fed Chairman Powell also stated that the Fed has no intention of holding Bitcoin, which dampened investment sentiment in the cryptocurrency market.
In addition, according to major broker FalconX, cryptocurrency investors also faced a large number of Bitcoin and Ethereum futures contracts expiring last Friday, preparing in advance for one of the largest such events in cryptocurrency history. Sean McNulty, trading director of market liquidity provider Arbelos Markets, stated that there is a risk of "dramatic market fluctuations" during the expiration of cryptocurrency futures. Therefore, even though the cryptocurrency investment firm MicroStrategy recently indicated that it might expand its token purchasing plan, Bitcoin and other cryptocurrencies remain volatile. MicroStrategy has transformed from a software manufacturer to a cryptocurrency investment firm and now holds over $40 billion in digital assets.
Trump's commitments may face multiple unrealistic factors.
Compared to the aforementioned short-term technical reasons, a larger factor causing the reversal of Bitcoin's bull market this time is that investors are assessing how much of Trump's support for the cryptocurrency industry can be realized, or whether it can be implemented.
In June this year, after Trump met with a group of cryptocurrency mining executives at Mar-a-Lago, he transformed from a cryptocurrency skeptic to a supporter, stating on social media that he plans to make Bitcoin completely 'Made in America.' These companies operate large data centers responsible for facilitating transactions on the blockchain in exchange for Bitcoin or other cryptocurrency payments. This stance helped him raise about $135 million for his campaign, all from the cryptocurrency industry, more than from any other sector. After being elected, he promised to create a cryptocurrency-friendly environment in the U.S. and expressed the idea of establishing a Bitcoin national reserve.
But after a wave of enthusiasm, this promise among the long list of campaign commitments he was preparing to fulfill was deemed difficult to realize by the market. Ethan Vera, the COO of Luxor Technology Company based in Seattle, stated: "This is a very Trump-style statement, but it will definitely not be a reality." The company provides software and services for cryptocurrency mining.
Vera provided unrealistic reasons, including: firstly, the blockchain is a decentralized network that cannot be fully controlled or prohibited from participation by any one party, and the current global mining market participants are extremely dispersed and highly competitive; secondly, Bitcoin's total supply is set at 21 million coins, which is one of its core design features. Currently, about 95% of Bitcoin has been mined. However, despite most of the Bitcoin being mined, it will take approximately 100 more years to reach the final limit of 21 million; thirdly, the Bitcoin mining industry in the U.S. has rapidly developed in recent years, becoming a multi-billion dollar industry, but according to industry analysis, the computing power of domestic miners in the U.S. is still far below half of the global total, making it nearly impossible for U.S. companies to fully support the entire Bitcoin network; finally, with the rise of large-scale operations globally, the competition in the cryptocurrency mining industry is intensifying, with Russian oligarchs, the Dubai royal family, and others being the latest batch of competitors to join.
Taras Kulyk, CEO of Synteq Digital, one of the largest brokers of Bitcoin mining computers, stated, "We have seen huge growth in several different global markets, with sales in Asia, Africa, and the Middle East on the rise, and demand increasing in countries like Kazakhstan." Specifically, he mentioned that Russia's relaxed stance on the cryptocurrency industry has also stimulated the recovery of the cryptocurrency sector in the country. At the same time, for some African and South American countries, the profit margins for Bitcoin mining are much higher than their American counterparts. Cheap energy is abundant in Africa, and Ethiopia, rich in hydropower resources, is one of the fastest-growing cryptocurrency mining centers on the continent. Mining revenues measured in U.S. dollars provide local operators in countries like Argentina with a way to escape the inflation spiral and preserve some savings. In addition, as electricity costs rise in states like Texas, even some American miners have begun to expand overseas. For example, the largest mining company by market capitalization, MARA Holdings, announced plans to form a joint venture with a local company under a sovereign wealth fund in Abu Dhabi. This joint venture aims to build one of the largest cryptocurrency mining farms in the Middle East.
In fact, even the cryptocurrency mining business within the U.S. is not solely targeting domestic miners. Many miners provide hosting services, allowing individuals and businesses from both the U.S. and abroad to purchase machines, pay operational fees to run the machines, and earn Bitcoin.
In addition to the aforementioned unrealistic factors, Vera also stated that Trump's high tariff policies could increase the cost of Bitcoin mining machines, "This is particularly crucial because mining machines and electricity are the two largest expenses for Bitcoin miners. Therefore, for many miners, if Trump triggers a trade conflict, it will harm them."