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It’s been a while coming but Bitcoin has made a new all time high and is moving into price discovery mode, currently trading at ~$76,500. There are no really clear levels here for short sellers to get excited about before we start to approach the $100k mark. So it should be plain sailing right? Nope this is crypto. Trump Making Crypto Great Again
Bitcoin is up on the back of the Trump victory, which is perceived to influence the crypto market positively. Promises of firing the industries villain figure Gary Gensler on day one of his presidency suggests there could be some merit to predictions of a better regulatory environment. There are also rumours circulating that Hester Peirce could be next in line for chair of the SEC which would be an incredible win for the blockchain industry. She has stood as the voice of reason for some time (examples * *) and has been critical of the regulation by enforcement approach. The SEC has mainly focused on the industry giants and exchanges and I think this could be particularly positive for American based exchanges and DeFi projects. Projects like Uniswap benefit because they are currently being litigated against, which could go away. There could also be more regulatory clarity in future which could solve the legal issue of how to return value to UNI token holders. It’s something to keep an eye on because DeFi giants might become investible again and large cap crypto funds could look to allocate profits up the risk curve just like us mere mortals did in 2017 and 2021. Institutions are not immune to fomo and there will be a certain percentage that allocate capital to riskier and riskier digital assets at the worse possible times. The Trump family (mainly Eric) is building a DeFi project at World Liberty Financial. However their tagline on X is “Whitelists are open for accredited investors in US and all non US people, KYC required” sounds a little like they might not be all in with the De in DeFi. Trump has also launched his own NFT’s in the past and holds $5m (pocket change for someone with a net worth in the region of $8 billion) in digital assets, he’s clearly good for crypto. There is also the bromance situation with Elon who is holding Bitcoin in corporate treasuries. Elon is also being tasked with setting up a D.O.G.E department of government efficiency which could bring some attention to a certain memecoin which he has supported in the past. Market ReactionThe Trump victory put a god candle in the daily chart which pushed Bitcoin above the previous all time high. Since then it’s gone back to slow and steady upwards momentum. Over the next few weeks it will be interesting to see how the markets react to the price discovery phase. There are 3 significant possibilities I think are worth considering here:
None of these would surprise me but my gut feeling is that we are just getting started. If we take a look at the Bitcoin historical volatility index you can see just how well behaved Bitcoin has been.
Late stages of bull markets tend to see spikes in volatility and this would suggest we are nowhere near there yet. If you got into crypto since 2022 understand that it’s not always like this, expect pain and euphoria in equally extreme doses. Ethereum OutperformanceEthereum outperforming as Bitcoin makes a new all time high was a welcome surprise. I got very luck with the timing of this trade and that shouldn’t fool anyone into thinking that I know what I am doing. A better regulatory environment is more beneficial to Ethereum (and other smart contract platforms) than it is for Bitcoin. Particularly for the founders, developers and investors that are building within these ecosystems. For ETH/BTC there’s some resistance where it’s trading now at 0.039 which if it breaks past this will put us back into the channel which has a ceiling at around 0.05. I’d expect any move through this channel to happen quickly, we are talking weeks not months and potentially by the end of the year. There’s also Ethereum’s previous all time high against the dollar at around $4,100 (currently trading at ~$3000) to consider. This could bring some resistance but also attention to the ETH ecosystem. I’m currently writing this from Bangkok Thailand where next week we have Devcon7. There is definitely a bull market feel and upbeat sentiment from the people I’ve met so far. Since the election sentiment on socials seems to have started shifting as well, this will be dependent on continued outperformance creating a self-fulfilling cycle. For developers and builders at least we are back, hopefully the users will follow. Crowded TradeEverything is lining up perfectly with how most market participants expected it to go. There are a lot of people who bought Bitcoin in the FTX crash at below $20k with plans to sell it when it gets to somewhere around $100k which seems almost too inevitable. It can’t be that easy to put in a 5x return can it? I don’t think anyone is selling here on day 3 since the new ATH but a lot of holders are eyeing up that $100k level. Many funds and speculators will have profit targets in the region of $90-100k to frontrun a bounce off resistance or the expected profit taking. My personal plan to get back to a 60/40 portfolio hasn’t changed with my first level in that region. There are also the Microstrategies of the world who are apparently never selling and happy to hold digital assets forever. I personally have never been more bearish on fiat currency but I do want to get back to some stablecoin exposure to reduce portfolio volatility in dollar terms, provide future living expenses and also to speculate with when we have those extreme bear markets with “crypto is dead” vibes.
Potentially it could come from renewed interest from a wider mainstream audience, inflows into the ETF’s as institutional investors fomo in, or it might just not be there. If everyone is in the same trade it never works out well and the ones that get in and out early do well while everyone else is left holding the bag. If Bitcoin get’s into the $90k region and sells off the narrative could shift to “is the bull market over” and from there panic selling could ensue. This isn’t guaranteed and hopefully we can slowly and steadily grind our way up to $100k and beyond - a supercycle 🤦♂️
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