Will Trump's Comeback Spark Another Bitcoin Rally?

After Donald Trump won the 2024 U.S. presidential election, the price of Bitcoin quickly surged past $76,000, setting a new all-time high. This price increase was a direct market reaction and a response to Trump's promises to support the crypto industry. BlackRock's Bitcoin exchange-traded fund saw over $1 billion in trading volume within the first 20 minutes of trading, marking a historic milestone for the crypto market.

During his campaign, Trump explicitly expressed his support for cryptocurrencies, promising to create a more relaxed regulatory environment for the industry, particularly by potentially replacing the current U.S. Securities and Exchange Commission (SEC) chairman, Gary Gensler. Gensler's tough regulatory policies have created uncertainty for the cryptocurrency market. If Trump fulfills his promise to remove Gensler, it could lead to a more favorable regulatory environment for cryptocurrencies.

Trump's stance on crypto contrasts sharply with that of the current Biden administration. Under Biden's regulatory framework, the SEC has initiated over 100 enforcement actions against crypto companies, creating uncertainty in the market. In contrast, Trump has not only supported the growth of Bitcoin and other crypto assets, but he has also proposed making the U.S. the global hub for crypto, even suggesting the creation of a Bitcoin strategic reserve to promote innovation in the industry. This position contrasts with Democratic candidate Kamala Harris, who advocates for stricter regulatory measures.

Matthew Hougan, Chief Investment Officer at Bitwise Asset Management, stated, "The crypto industry has felt like it's been held back for years, but that could be coming to an end. People are starting to prepare for the future of crypto over the next few years."

In addition, Fadi Aboualfa, Research Director at Copper.co, pointed out that according to valuation models, Bitcoin could reach $100,000 when Trump is sworn in as president in January. Bernstein Asset Management also released a report predicting that if Trump wins the election, Bitcoin's price will exceed its historical high of $73,800 and might reach the $80,000 to $90,000 range in the following weeks.

Nic Carter, a partner at Castle Island Ventures, stated that under Trump's leadership, the crypto industry is expected to experience a more favorable regulatory environment, potentially with new legislation specifically aimed at crypto companies. If Trump does include Bitcoin on the U.S. government's balance sheet, it could stimulate demand for Bitcoin from other countries, further driving up its price.

However, the impact of Trump's policies on Bitcoin is not limited to short-term price fluctuations. Due to Bitcoin's limited supply (21 million coins), it is viewed as a "hard currency" that can hedge against inflation. With Trump's policies potentially leading to higher fiscal deficits and looser monetary policies in the U.S., Bitcoin's value is likely to be supported. In particular, as the dollar weakens and global economic uncertainty increases, more investors may turn to Bitcoin as a hedge against inflation, driving demand for it as a store of value.

In recent years, digital assets have grown in influence and become an increasingly important part of the global asset market. Data shows that Bitcoin has been one of the most volatile assets among major global assets in the past decade, with a volatility of 38.3% in 2023, far surpassing oil and the Nasdaq 100 Index.

The dynamics in the options market show strong investor expectations for Bitcoin's future price volatility. Open interest has reached a historic high of nearly $25.2 billion, just below the record set in March at $30.2 billion. Meanwhile, options trading volume surged to $2.9 billion, reflecting significant market interest in Bitcoin's future movement. The ratio of put options to call options is almost balanced, suggesting that investors are preparing for potential profits and downside risks. The volatility risk premium (VRP) has reached 27.9%, indicating that traders expect Bitcoin's price to experience significant fluctuations in the future.

The futures market also shows potential for Bitcoin's price to skyrocket. According to Vetle Lunde, Research Director at K33 Research, the record-breaking surge in Bitcoin's price after Trump's election may be the beginning. The Chicago Mercantile Exchange (CME) basis has risen from 7% to over 15%. At the same time, the trading price of perpetual contracts has surged to the largest premium since March, signaling a sharp shift in market risk appetite.

Despite the positive expectations surrounding Trump's crypto policies, the market still faces regulatory uncertainty. Whether Trump's promises can be fulfilled, particularly regarding how he appoints new regulatory agency leaders to implement these policies, remains to be determined.

More importantly, even if Trump wins, whether he can fully overhaul the existing financial regulatory framework and whether this process will face resistance from the legislative and judicial branches will directly affect the market's long-term direction.