Mon, 11/18/2024 - 14:14
Over its relatively short history, Bitcoin has become a household name and one of the most traded assets on the financial markets. Once characterised by intense volatility and huge price swings, the original cryptocurrency has been much more stable in recent years following widespread institutional adoption and swelling market cap. Following the "crypto winter" of 2021-2022, it's been nothing but gains for BTC in a bear market that has surprised analysts with its consistency, duration and steady nature. Between November 2022 and November 2024, Bitcoin went from $21,000 to $69,000 in gradual increments, taking almost 18 months to reach its pre-2022 all-time high again. However, that all changed with Donald Trump's triumph in the US presidential election.
In the week immediately following the Republicans' win on 5 November, BTC gained over 30% to break $90,000 for the first time ever, marking a significant milestone on the road to the $100,000 target that many thought was a pipedream. Having dipped slightly, Bitcoin currently sits at just over $90,000 again as of 18 November, but some think there's still plenty left in this rally. So, in an attempt to answer the question on every crypto trader's lips, this piece will look at the key factors likely to influence the trajectory of Bitcoin into 2025.
Trump card
It's hardly surprising that the cryptocurrency market reacted so positively to the election result. The President-elect has stated multiple times that he will make the US the crypto capital of the world. After the appointment of Elon Musk to lead a government efficiency drive, Dogecoin also experienced a huge boost, gaining 153%. In the absence of a coherent crypto policy from the Democrats, Trump was always billed as the crypto-friendly candidate. This reputation was cemented in late September when Donald and his three sons unveiled World Liberty Financial, the Trumps' decentralised finance (DeFi) money market platform and rubber-stamped by the appointment of Elon Musk. More generally, though, the Republicans are known as the party of minimal regulation and lower taxes, something that always plays well with the crypto community. In this election cycle, the impact was even more pronounced, given the clean sweep that saw the Republicans gain control of the White House, the Senate and the House of Representatives.
It's the economy, stupid
While it could be argued that the election reaction was somewhat over-exuberant, there are also significant macroeconomic fundamentals that back up the bullish sentiment on Bitcoin. The labour market is still fairly solid even after the short-term impact of the hurricanes, inflation is back to within touching distance of the 2% target, and the US regulator has completed an emphatic pivot to a more dovish monetary policy. Following a double reduction of 50 bps in September, the Fed made another 25 bps cut last week to bring the funds rate to 4.50%-4.75%. The correlation between lower rates and better performance of risk assets is well known, and for ultra-high-risk crypto, this effect is understandably even more pronounced.
But it isn't just physical Bitcoin that is seeing increased action. SoSoValue data showed that spot BTC ETFs added $510.11 million on 13 November for their sixth consecutive day of positive net inflows. And with the CPI numbers for October showing just a 0.2% increase, the impact of the Fed's cuts seems to have been well absorbed, paving the way for another 25 bps reduction before the year's end. In a protracted low-rate environment with a favourable political and central bank attitude towards digital currencies, there's no reason the good times can't continue for Bitcoin. As markets gear up for the Santa Claus rally in a couple of weeks, we might even see a push towards the fabled $100,000 resistance level.
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