U.S. President-elect Trump supports the development of cryptocurrencies in the U.S. After his election, Bitcoin entered a new round of bull market and set a historical high on December 17.
Good times didn't last long; after a surge of emotional trading, Bitcoin's market has recently reversed sharply and is likely to record its first monthly decline in four months in December. Some market participants believe that Trump's promises regarding cryptocurrencies during the election may be difficult to realize.
Bitcoin will record its first monthly decline in four months.
In the final days of this record-breaking year for cryptocurrencies, Bitcoin's rise suddenly lost momentum. Public data shows that after reaching a historical high of $108,316 on December 17, Bitcoin fell to around $95,000 last Friday, a decrease of nearly 3% from the previous trading day. By midday 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 Bitcoin's first monthly decline in the past four months.
Previously, although the Federal Reserve cut interest rates again in its December rate decision, it hinted that it would only cut rates twice next year, and Bitcoin immediately reacted by adjusting. 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 focusing on the recent easing of U.S. inflation and economic activity data; however, it acted as a catalyst, washing away some of the excessive speculative behavior that flowed into risk assets (including stocks and Bitcoin) after the U.S. election.' Additionally, at the post-meeting press conference, Federal Reserve Chairman Powell also stated that the Federal Reserve has no intention of holding Bitcoin, further dampening investment sentiment in the cryptocurrency market.
Additionally, according to major broker FalconX, cryptocurrency investors faced a large number of Bitcoin and Ethereum futures contracts expiring last Friday, prompting them to prepare for one of the largest similar events in cryptocurrency history. Sean McNulty, trading director at market liquidity provider Arbelos Markets, stated that there is a risk of 'severe market volatility' during the expiration of cryptocurrency futures. Therefore, even though cryptocurrency investment firm MicroStrategy recently indicated a possible expansion of its token purchase plans, Bitcoin and other cryptocurrencies remain unstable.
Trump's promises may face multiple unrealistic factors.
Compared to the aforementioned short-term technical reasons, a larger factor causing the reversal of this round of Bitcoin bull market is that investors are evaluating how much support Trump can ultimately provide to the cryptocurrency industry or whether it can be realized.
In June of this year, after meeting with a group of cryptocurrency mining company executives at Mar-a-Lago, Trump transformed from a cryptocurrency skeptic to a supporter, stating on social media that he plans to make Bitcoin fully 'Made in America'. The aforementioned companies operate large data centers responsible for facilitating transactions on the blockchain in exchange for Bitcoin or other cryptocurrency payments. This attitude helped him raise about $135 million for his campaign, all from the cryptocurrency industry, more than from any other sector. After his election, he promised to create a cryptocurrency-friendly environment in the U.S. and expressed the idea of establishing a Bitcoin national reserve.
However, after a wave of enthusiasm, this promise among the long list of campaign commitments he was preparing to fulfill is seen by the market as difficult to realize. Ethan Vera, COO of Luxor Technology, based in Seattle, said, "This is a very Trump-style statement, but it will definitely not be a reality." The company provides software and services for cryptocurrency mining.
Valer gave unrealistic reasons, including: first, the blockchain is a decentralized network that cannot completely control or prohibit any party's participation. Currently, the global mining market is extremely fragmented and competitive; second, Bitcoin's total supply is set at 21 million, which is one of its core design features. About 95% of Bitcoin has already been mined. However, despite the majority of Bitcoin being mined, it will take approximately 100 years to reach the final cap of 21 million; third, 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, U.S. miners' computing power still falls far below half of the global total. Therefore, it is nearly impossible for U.S. companies to fully support the entire Bitcoin network; finally, with the rise of large-scale operations globally, competition in the global cryptocurrency mining industry is intensifying, with Russian oligarchs and the Dubai royal family being the latest batch of competitors to join.
Taras Kulyk, CEO of Synteq Digital, one of the largest brokers for Bitcoin mining-specific computers, stated, 'We have seen tremendous growth in several different markets globally, with sales increasing in Asia, Africa, and the Middle East, and demand is also rising in countries like Kazakhstan.' Specifically, he mentioned that Russia's relaxed stance on the cryptocurrency industry has also stimulated the revival of the country's cryptocurrency sector. At the same time, for some African and South American countries, the profit margins from Bitcoin mining are significantly higher than their American counterparts. Cheap energy is widespread in Africa, and Ethiopia, rich in hydroelectric resources, is one of the fastest-growing cryptocurrency mining centers on the continent. Mining revenues denominated in dollars provide a way for local operators in countries like Argentina to escape the inflation spiral and retain some savings. Furthermore, as electricity costs rise in states like Texas, even some U.S. miners have begun to expand overseas. For example, the largest mining company by market capitalization, MARA Holdings, has 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 facilities in the Middle East.
In fact, even the cryptocurrency mining business within the U.S. does not solely target domestic miners. Many miners offer hosting services, allowing individuals and companies from the U.S. or overseas to purchase machines, pay operating costs to run the machines, and earn Bitcoin.
In addition to the aforementioned unrealistic factors, Valer also stated that Trump's high tariff policies may increase the cost of Bitcoin mining machines. 'This is especially critical because mining machines and electricity are the two biggest expenses for Bitcoin miners. Therefore, for many miners, if Trump triggers a trade conflict, it will harm them.'