Trump's election as the new President of the United States became the biggest political and economic topic in November. Unsurprisingly, Trump's ascendancy had a huge impact, as his 'Trump 2.0' economic policy route, which differs from other parties, and strong support for cryptocurrency reversed the previous trading logic in the market. Liquidity began to flow into more sectors, and the cryptocurrency market's celebration was closely related to Trump; all this seemed to indicate that a new trading logic system was being born.
With the end of the U.S. elections, Trump was re-elected as President of the United States, becoming the 47th President. Thus, the election boot has dropped, and the U.S. will return to the right-wing development approach, also alleviating global traders' concerns about election risks.
As a traditional conservative, the Republican Party advocates tax cuts, revitalizing manufacturing and traditional energy industries, reducing government regulatory powers, and expelling illegal immigrants, while 'Trump 2.0' further implements the 'MAGA Party' policy concept.
From a policy perspective, Trump's policy approach is very similar to Reagan's, both adopting a 'loose fiscal policy + deregulation + trade protectionism' policy mix. Reagan led the U.S. out of the economic environment of stagflation after the oil crisis with this approach, driving economic recovery and ultimately achieving the 'Reagan cycle,' which continued to influence subsequent U.S. economic policies. Whether Trump can replicate Reagan's 'successful' path and pull the U.S. economy back from the edge of stagflation has become the most focused point of his tenure.
The similarity between Trump's policies and Reagan's policies may become the main trading logic for subsequent 'Trump trades,' which investors can continue to monitor.
Returning to the inflation data and Federal Reserve policies in November. On November 26 local time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) meeting held on November 6-7. The minutes showed a 25 basis point rate cut in November, in line with expectations. At the same time, the Federal Reserve emphasized that 'participants expect that if the data aligns with expectations, inflation continues to decline to 2%, and the economy remains close to maximum employment levels, a gradual shift to a more neutral policy stance over time may be appropriate.' This 'more neutral policy stance' means that the Federal Reserve will no longer deliberately pursue interest rate hikes or cuts but will adjust based on market economic conditions, which undoubtedly suggests that the Federal Reserve is optimistic about the U.S. economy's exit from recession and future recovery.
In November, the U.S. stock market operated smoothly, with small incremental breakthroughs of historical highs. In the AI field, although Nvidia (NVDA) reported third-quarter earnings that exceeded expectations, the lack of 'excessive outperformance' caused a 5% drop in after-hours trading on the day of the earnings announcement. Currently, the market's attitude towards AI seems to be 'as long as it is not excessively explosive, it is not up to expectations.'
Since Trump's election, Bitcoin has soared like a wild horse, heading straight for $100,000. Market FOMO sentiment has been strong, only slightly easing in the last week of November. Against the backdrop of Trump calling for 'Bitcoin as a strategic reserve,' Pennsylvania took the lead in passing the (Bitcoin Rights Bill), and the market seems to have welcomed the 'Trump era' for cryptocurrency, which is becoming an object of legislative protection in the traditional world, truly integrating into everyone's daily life.
If Trump's election brought Bitcoin to new heights, then Musk completely ignited the MEME track. With Musk joining the 'Trump 2.0' government team, three Musk-related coins surged violently. Behind this little episode, the longer narrative is that Musk, as a leader in technological innovation, may accelerate the advancement of cryptocurrency technology, such as promoting the integration of AI and blockchain.
Thus, cryptocurrency rightly replaced AI as the darling of the stock market in November, and people naturally sought opportunities related to cryptocurrency in the secondary U.S. stock market. Among the Bitcoin frenzy throughout November, the biggest winner that emerged was MicroStrategy (MSTR) — MicroStrategy's stock price increased by more than 140% at its peak in November.
Source: StockCharts.com
MicroStrategy was originally a niche software company established in the 1990s. After surviving the tech bubble of 2000, it entered a stable business period but had almost no significant growth potential until its CEO Michael Saylor became a Bitcoin believer around 2020, incorporating Bitcoin as a core strategy into the company's balance sheet and successfully constructing a 'Bitcoin-driven' company growth logic: Bitcoin constitutes a significant portion of company assets, and its value fluctuations directly impact company value. As Bitcoin's price rises, MicroStrategy's stock price rises sharply due to asset increases, with daily trading volume surpassing Nvidia's. Through leveraged capital operations, the company was able to issue additional stocks to raise money to continue buying Bitcoin. During November, MicroStrategy raised $4.6 billion by issuing additional stocks and reinvested all of it into Bitcoin, driving up Bitcoin's price, thus forming a cycle of buying Bitcoin - stock price increase - borrowing or issuing more stocks to buy more Bitcoin, closely linking shareholder interests with Bitcoin appreciation. The unexpected rise in MicroStrategy's stock price is essentially viewed by some investors as an indirect way of holding Bitcoin and they are willing to pay a premium for it.
Bitcoin has achieved MicroStrategy, and MicroStrategy has also achieved Bitcoin. Its frantic debt issuance and stock sales to buy Bitcoin, along with its high-profile market style, propelled Bitcoin from $70,000 to $90,000, just as the Bitcoin ETF previously helped Bitcoin rise from $40,000 to $70,000. Therefore, MicroStrategy is also considered the biggest driver in this round of Bitcoin's rise from $70,000 to $90,000.
Some investors believe that MicroStrategy has ingeniously discovered a clever method to exploit the loopholes of fiat currency systems, leveraging the inefficiency of traditional capital markets to gain leverage advantages against fiat currencies, and perfectly integrating them with the predictability of Bitcoin, thus endowing itself with significant upward potential. In short, it means acquiring scarce and appreciating assets with cheap and constantly expanding capital. Of course, this logic assumes that Bitcoin will inevitably succeed in the long term. As of the latest data, MicroStrategy currently holds 279,420 Bitcoins.
MicroStrategy's 'digital gold standard' strategy and capital operation model provide us with a new experimental paradigm. If market conditions continue to improve, this model may become an industry pioneer, guiding other companies to adopt similar strategies, accelerating the adoption of Bitcoin on corporate balance sheets, and promoting Bitcoin's recognition as a top-tier asset.
The market's rise has already led retail investors to sell Bitcoin in pursuit of the so-called high returns of meme coins; Bitcoin is now the main battlefield for whales. Some believe the biggest risk for Bitcoin currently comes from the selling of whales. As one of the largest whales, MicroStrategy's biggest selling risk lies in the forced liquidation of bonds due to a drop in Bitcoin prices, which could lead to a self-reinforcing decline in Bitcoin prices.
However, this argument overlooks MicroStrategy's bond structure. The bonds issued by MicroStrategy are convertible bonds, which belong to over-the-counter leverage. Even if MicroStrategy cannot repay the debt on the repayment date three years later, creditors can only convert the debt into stocks and sell them in the stock market; this cannot shake Bitcoin's price. Therefore, rather than worrying about MicroStrategy being forced to liquidate and sell coins to repay debt, it may be wiser to worry about those buying MicroStrategy stocks in the U.S. stock market.
Investor Victor Dergunov has clearly pointed out that although MicroStrategy has demonstrated exceptional foresight, its stock is clearly in an overbought state and can be seen as a typical bubble in the entire cryptocurrency sector. Although Bitcoin is far from its peak, reality has already sounded the alarm, reminding us what can happen when the market overheats too quickly; the market's valuation of MicroStrategy will reach a clearer consensus, and that valuation should be significantly lower than its current level.
Of course, a more promising future is that we may see Bitcoin gain a place on the balance sheets of thousands of companies, making MicroStrategy a financial pioneer that will be recorded in history.
In November, under the backdrop of Trump's election as U.S. President, the economy exhibited multi-dimensional changes. The FOMC meeting cut interest rates by 25 basis points, likely continuing the easing in December, injecting liquidity expectations into the economy. Trump's economic team was established and promoted, with policy proposals expected to replicate the previous path of high economic growth. The U.S. stock market maintained its upward trend, reaching new highs, and the cryptocurrency market celebrated under Trump's favorable conditions, with Bitcoin approaching $100,000, while MicroStrategy rose due to its Bitcoin holdings and the establishment of new capital operation experiments. Looking ahead, attention should be paid to the implementation and pace of Trump's policies, as well as the impact of interest rate cuts on the economic structure. If Trump's commitments to the cryptocurrency industry are partially realized, $100,000 may not be the endpoint for Bitcoin's price but merely a milestone in its upward trajectory. The road is winding, but the future is bright.
