Overall, the current indicators suggest that the crypto market is in the mid-phase of a bull market, with major market indicators far above the cycle's low points but not yet reaching levels that signify previous market tops. The continued growth in trading volume and DeFi locked value represents further enhancement of market activity, while the total amount of stablecoins and accelerated capital inflows indicate a loose market funding environment and increasing liquidity, providing fundamental support for the rise of the cryptocurrency market and driving prices upward.
What still threatens the market?
Currently, Bitcoin prices have largely reflected the market's optimistic expectations of a policy shift. However, this also means that if there are delays or if the policy does not meet market expectations, it may significantly impact market sentiment. For example, changes in SEC leadership or the process of releasing Bitcoin strategic reserve plans may become potential risk points.
Any unexpected changes in the Federal Reserve's monetary policy path, especially a re-acceleration of interest rate hikes or a significant tightening of policy stance, may have a direct impact on the market liquidity, thus suppressing the performance of BTC and other crypto assets.
The cryptocurrency market is dominated by retail investors and is easily influenced by emotions. This characteristic makes the market prone to speculative bubbles, and the risk of severe price fluctuations under emotional volatility significantly increases.
What can Trump's commitments bring to the market?
Trump's election brings expectations of relaxed regulation for the crypto industry, including the announcement of a Bitcoin reserve and the nomination of a crypto-friendly SEC chair. These measures will short-term boost Bitcoin prices, but more importantly, the legislative progress in the medium to long term. If three key bills are pushed through, the US crypto industry will enter a new development phase.
(1) The FIT 21 Act will be prioritized, and DeFi innovation may 'flow back' to the US.
The FIT 21 Act is seen as a milestone in the crypto space, aiming to clarify the commodity and security attributes of cryptocurrencies and resolve the regulatory disputes between the SEC and CFTC. Following Trump's election, the bill's progress is expected to accelerate, potentially leading to more compliant trading platforms and financial products in the US, enriching the types of spot ETFs and paving the way for more crypto asset ETFs. At the same time, decentralized application innovations will be encouraged, especially in the DeFi sector. The bill stipulates that tokens that meet decentralized standards may be exempt from regulation, attracting more projects back to the US. The combination of traditional capital and RWA (real-world asset tokenization) will promote the integration of on-chain finance with real assets.
(2) The US stablecoin legislation may return to the agenda.
In 2023 (clarity on payment stablecoins) failed to pass due to political disagreements. Trump's election and his opposition to CBDCs may inject new momentum into stablecoin legislation. Clear compliance standards will benefit compliant stablecoins such as USDC, accelerating adoption by traditional payment institutions. As the role of stablecoins in cross-border payments increases, their market share and user base will continue to grow.
(3) The proposal to repeal SAB 121 will restart, and the challenges of crypto asset custody will welcome breakthroughs.
The SAB 121 announcement released in 2022 imposes strict requirements on the accounting treatment of crypto assets, hindering the development of custody services. Trump's commitment to repeal SAB 121 will reduce compliance costs for financial institutions entering custody services, attracting more institutional investors and traditional custodians to participate in on-chain business. The stablecoin and RWA sectors will benefit, driving the trend of digital asset management in traditional assets.
How will the market direction unfold?
The market is currently experiencing short-term fluctuations and corrections, with some profit-taking occurring at the end of the year at elevated levels. Additionally, the market needs time to digest the possible hawkish turn of the Federal Reserve early next year and the policy expectations of reducing rate cuts. In the short term, there is a lack of new driving forces, and prices may fluctuate within the range of $90,000 to $105,000.
After the consolidation phase ends and funds re-enter the market, with negative news gradually digested, the market will welcome a new round of increases in the first quarter of the year. Bitcoin prices may break through the $120,000 mark during this phase, and in an optimistic scenario, could even reach $150,000 to $200,000.
Looking at historical cycles, Bitcoin bull markets typically enter a correction phase about 15 to 18 months after halving, which also means that the market is likely to enter a correction phase after reaching new highs mid-year or in the second half of the year.
The bull market rhythm will continue in the first half of the year, but mid-year and after the third quarter, one must be wary of the risk of topping and correction, and seize the right timing to exit. From a cyclical perspective, as institutional funds continue to enter the market and future regulations become more standardized, the overall market cycle may be extended in terms of time.
Although Bitcoin enjoys the title of 'digital gold,' it also always hides high risks. Whether one can seize the opportunity and smile at the next wave of increases depends on the degree of grasping the market pulse. I hope everyone can earn a lot in the new year.
Remember to take profits in a timely manner. The true 'altcoin season' will come after Bitcoin peaks, but be sure to exit the market before the end of 2025, as 2026 may usher in a bear market, with prices possibly dropping by 80% to 90%.
In a highly volatile market, you cannot perfectly grasp every fluctuation. You do not need to buy at the lowest point or sell at the highest point; just focus on long-term gains.
