Bitcoin suffered its biggest two-day drop since the U.S. election last weekend, falling nearly 3% on Saturday and Sunday before recovering some of its losses to trade at $90,394.2 at press time. Uncertainties affecting the market include Trump's timetable for fulfilling his promise to support cryptocurrencies and whether all measures are feasible, such as establishing a U.S. Bitcoin reserve.
In U.S. stocks, euphoria over Trump’s business-friendly stance is being tempered by inflation risks from trade tariffs and deficit spending to finance tax cuts. Investors are tempering expectations for Federal Reserve rate cuts as the U.S. economy looks solid, which could be a hurdle for cryptocurrency markets as liquidity conditions affect speculative demand for digital currencies.
Tony Sycamore, market analyst at IG Australia Pty, wrote in a note that bitcoin had become “overheated” after its record run since Election Day on Nov. 5, and that “much positive news has been priced into its price rally.”
Cryptocurrency legislation could soon be approved under the Trump administration, prompting a shift in regulation from enforcement to a more collaborative approach, JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou wrote in a note.
The team said banks can enjoy greater participation in the digital asset space, and the market is more hopeful that cryptocurrency ETFs will be approved to invest in cryptocurrencies other than Bitcoin and Ethereum.
Strategists say regulatory clarity will provide a boost to venture capital, mergers and acquisitions, and initial public offerings. But they add that building a U.S. bitcoin reserve is a “low-probability event.” (Bloomberg)

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