Bitcoin poised for growth under Trump’s crypto-friendly shift

Six years ago, when bitcoin enthusiasts argued it would cost 100 thousand dollars, they were at the forefront. Such a prediction for a cryptocurrency created by an anonymous founder and lacking a central authority seemed absurd until Donald Trump won this year's presidential elections in the United States.

According to coinmarketcap.com, on 22 November, bitcoin was about 344 dollars short of reaching 100,000. Over the weekend, the cryptocurrency slightly lost value—on Sunday evening (EST), it cost around 96 thousand dollars, which is 3.6 percent less than on Friday. On Monday, the price returned above 98 thousand dollars.

According to my assumptions, the bitcoin price could rise to even $120 thousand by the end of this year. However, Daniel Kostecki, chief market analyst at CMC Markets Poland, predicts that 2025 will be a year of trial for the cryptocurrency in a conversation with Money.pl.

Next year, the Fed, the central bank of America, intends to keep interest rates at a relatively high level, which, according to Kostecki, may cool the enthusiasm of investors from Wall Street. A counterbalance for the decline of bitcoin prices - as the analyst adds - might be the creation of a strategic reserve in cryptocurrencies according to Donald Trump's election promise.

The government will have to raise money for the Bitcoin purchase through bond issuance or the pockets of American taxpayers, which could maintain demand for the cryptocurrency. However, our interviewee claims that it's unknown how the public will react if the state indeed decides to spend billions of dollars to buy bitcoins.

It is estimated that the US government holds about 200 thousand bitcoins, mainly from confiscations. According to Trump's announcements, within five years, there should be as many as a million of them, which is about 5 per cent of the total cryptocurrency supply (21 million units).

During his presidential campaign, the Republican stated at rallies that he wanted to make the United States the global capital of cryptocurrencies. That was enough to attract significant capital to the bitcoin market, but the rally started when it turned out Trump won the elections. On Thursday, 7 November, ETFs (Exchange Traded Funds) investing in this cryptocurrency received a record 1.4 billion dollars, of which as much as 81 per cent of this amount went to iShares Bitcoin Trust, a fund managed by BlackRock.

These spot-type investment funds reflect Bitcoin's current market value and allow investors to buy shares through a traditional exchange. Thus, direct involvement in the cryptocurrency market is avoided. The first such ETFs were established in the United States this year after years of waiting for approval from American regulators.

The rapid development of bitcoin ETFs will contribute to the inflow of new institutional investors. These factors create the perfect conditions for reaching new highs - believes Thomas Perfumo, chief strategy officer at Kraken, a cryptocurrency exchange based in San Francisco, California, when asked by money.pl.

Giving the green light to the market for launching spot funds in January 2024, the head of the Securities and Exchange Commission (SEC), Gary Gensler, emphasized that this does not mean support for Bitcoin. The point is that his days as chairman of the Commission are numbered. A few days ago, Gary Gensler announced that he would step down on 20 January when the president-elect's administration takes over. Thus ending a tenure marked by a stringent policy towards the virtual currency industry and preempting action from Donald Trump, who threatened to fire him when he took office as the President of the United States.

In just under three weeks, from 6 November, bitcoin's market capitalization increased by almost 600 billion dollars, reaching almost 2 trillion. In recent days, not only the news about Gensler but also unofficial reports from Bloomberg that the president-elect's team is conducting talks with the digital asset industry about creating a new position in the White House dedicated solely to cryptocurrency policy have been fueling the cryptocurrency's price surge.

According to Bloomberg's sources familiar with the matter, the person in this role would lead a small team and act as a liaison between Congress, the White House, and various agencies overseeing cryptocurrencies, such as the SEC or the Commodity Futures Trading Commission. On this matter, Trump reportedly met with Brian Brooks, former director of Coinbase Global and Binance.US, who is also a potential candidate for SEC chairman and with Brian Armstrong, CEO of Coinbase Global. The mentioned companies are cryptocurrency exchanges based in California.

- The post-election rally in the cryptocurrency market is a result of deferred demand, previously suppressed by uncertainty and lack of a clear regulatory vision in the United States. This factor combined with positive macroeconomic forecasts for 2025 creates very favourable conditions for cryptocurrencies - believes Thomas Perfumo.

According to him, the rapid pace of this bull market should not be surprising.

We are dealing with a sharp increase in demand for a commodity whose supply is fixed and does not respond to price signals. In the case of traditional commodities, such as oil or precious metals, mining and refining companies would increase production to meet demand. In the case of Bitcoin, it is completely different, he argues.

Over 94 percent of all bitcoins have already been mined using computers' computing power. The annual supply is about 0.8 percent and will decrease each year. With the current high demand for bitcoin, according to Thomas Perfumo, there is only one logical consequence: an increase in price.

Not only is Kraken full of optimism. The competitive Binance is also.

We are seeing tremendous interest in bitcoin and other cryptocurrencies. It's driven by many macroeconomic factors: interest rate cuts by the Fed, the prospect of a crypto-friendly Trump administration taking power in the USA, the recent approval of bitcoin ETFs, and the growing corporate interest in acquiring digital assets. While we cannot predict market behaviour, which has always operated in bull and bear cycles, we remain long-term optimistic - says to money.pl Natalia Kosińska, marketing manager at Binance.

She emphasizes that after each market correction, bitcoin has remained above the low of the previous cycle. Eryk Szmyd, an analyst at the XTB investment platform, also notes this.

- If previous cycles could serve as a guideline, the bull market should end roughly in the third quarter of next year. However, there is no certainty that everything will go according to plan because the activity of ETFs in the United States adds a new component to the demand for bitcoin - cautions the interviewee of money.pl.

Basing his findings on cycles from previous years, the XTB analyst forecasts that the bitcoin price during this bull run could rise to about 160 thousand dollars, while Ethereum - the second cryptocurrency by market capitalization - could reach 10 thousand dollars. Solana, considered Ethereum's main competitor, according to Szmyd, has the chance to surpass the 1 thousand dollar level. Ripple, on the other hand, could, with favourable winds, rise to about five dollars.

However, Peter Schiff, an American economist, bitcoin opponent, and gold supporter, is full of doubts. In his podcast, he commented on the sharp rise in bitcoin prices, stating that the technology company MicroStrategy is responsible for inflating the bubble.

It is a publicly traded company that buys bitcoins with money from debt securities. On Thursday, it announced the completion of a 3 billion dollar issuance to increase its cryptocurrency reserve. According to Schiff, this capital injection propelled digital currency valuations above $99 thousand dollars last week. This gambling approach could end in disaster—at least that's what Schiff thinks.

The market comprises tens of thousands of cryptocurrencies worth about 3.4 trillion dollars. Bitcoin accounted for 58 percent of this amount, and Ethereum—12 percent. Thomas Perfumo estimates that around 10 percent of the world's population currently has access to cryptocurrencies, while two-thirds of humanity has access to the internet. If the industry's growth rate continues, Kraken's representative expects a billion new cryptocurrency users within the next two or three years.

The Financial Supervision Authority (KNF), similar to the SEC under Joe Biden's administration, has a highly cautious approach to cryptocurrencies. The stance of the Polish financial market supervisor remains unchanged, according to which virtual currencies pose mainly high exchange rate risks that could lead investors to sudden losses and unpredictable outcomes. Moreover, the KNF warns participants in this market about hackers targeting cryptocurrency exchanges and wallets and about fraudsters posing as investment platforms aiming to empty the victim's account.