Bitcoin posted its biggest two-day decline over the weekend since the US election, amid a bout of caution in global markets as traders assess the potential impact of President-elect Donald Trump's policy agenda on markets.
The cryptocurrency fell about 3% on Saturday and Sunday, before recovering some ground to trade at $90,100 as of 9:05 a.m. Monday in Singapore. Among the uncertainties is Trump’s timeline for fulfilling his pro-crypto pledges, and whether they are all possible, such as creating a U.S. stockpile of bitcoin.
In the U.S. stock market, inflation risks from the prospect of trade tariffs and deficit spending to fund tax cuts are tempering the euphoria surrounding Trump’s pro-business stance. Investors are scaling back expectations for a Fed rate cut amid a strong economy, a potential drag on cryptocurrencies as liquidity conditions could weigh on demand for digital tokens.
hyperactivity
Bitcoin has become hyperactive after a record run since Election Day on November 5, and a lot of good news has been baked into the price, Tony Sycamore, a market analyst at IG Australia, wrote in a note.
Trump has pledged to create a crypto-friendly regulatory framework, create a strategic reserve of bitcoin, and make the United States the global center of the industry. Once a crypto skeptic, the president-elect has changed course after crypto companies spent heavily on the campaign trail to promote their interests.
Cryptocurrency legislation could soon be passed under the Trump administration, spurring a shift away from regulation through enforcement to a more collaborative approach, JPMorgan Chase strategists led by Nikolaos Panigirtzoglou wrote in a note.
They added that banks could have greater scope to deal with digital assets, and that markets are more optimistic about approving crypto exchange-traded funds that invest in tokens other than Bitcoin and Ethereum.
According to the strategists, regulatory clarity will be a tailwind for venture capital firms to enter the market, carry out mergers and acquisitions and initial public offerings. But they added that the creation of a U.S. bitcoin reserve is a low-probability event.
U.S. bitcoin exchange-traded funds attracted a net inflow of $4.7 billion from Nov. 6 to Nov. 13, the day the original cryptocurrency hit an all-time high, according to data compiled by Bloomberg. But about $771 million left the funds on Thursday and Friday.
