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Cryptocurrencies in renewed demand
Bitcoin has risen sharply, surpassing $87,000.00 for the first time, driven by President-elect Trump's support for this profile of financial instruments and the favorable scenario of a Congress made up of legislators who could create a more favorable environment. Trump's clear victory in the presidential elections sparked renewed enthusiasm and demand for digital assets, with more than 100 million dollars invested to support candidates favorable to the sector. Since last week's elections, bitcoin has risen by more than 25% to record consecutive all-time highs, with the rate and pace of daily evolution surprising.
Cryptocurrency-related stocks have also seen strong capitalizations, such as Microstrategy and Coinbase, both representatives of the sector, which have seen gains of around 25%, while mining companies such as Marathon Digital and Riot Platforms have seen gains of 30% and 25% respectively.
During the campaign, candidate Trump promised to put the US at the center of the digital asset industry, including the creation of a strategic bitcoin reserve and the appointment of cryptocurrency-friendly regulators. Currently the market seems unconcerned about the time needed to implement such measures or the possibility of creating a strategic bitcoin reserve. His economic program, very focused on domestic economic growth, with tax cuts and reduced bureaucracy, has encouraged investment and savings, boosting allocations to stocks, listed bonds and cryptocurrencies. The S&P 500 index hit its 50th annual record last week, and bitcoin is expected to more than double in 2024, supported by robust demand for US-specific ETFs and Federal Reserve rate cuts.
ETFs saw an increase in daily flows of between 1$ and 1.5 billion dollars and trading volume reached new highs, signs of how candidate Trump's victory influenced demand for cryptos, despite the fact that a significant part of the institutional market reduced its positions before the elections, re-entering after the results of the November 5 elections, creating significant buying pressure that could continue for some time. There seems to be a conservatism with the Biden Administration, which has adopted a more skeptical and defensive approach to digital assets, with the SEC stepping up scrutiny of the sector, identifying it as susceptible to fraud and irregularities, especially after the emblematic and media-driven collapse of FTX. However, such conservatism will have prepared us for the current stage.
The change in stance of the next president, who once considered cryptocurrencies a "fraud”, with the promise of favorable regulation and Republican control in Congress and the Senate, increase the likelihood of pro-crypto legislation being passed. With the increase in investment amounts, bitcoin has a market capitalization of 1.7 trillion dollars, correlating its most recent evolution to the Nasdaq index or gold.
Despite the current renewed enthusiasm, the market is wary of the memory that a correction would tend to be aggressive, even suggesting some neutrality after the strong performances. Despite the volatility and skepticism, the market is widening, with more traditional savers - who favor capital protection - looking for more information, especially by observing the dynamic and fluid ETF market. In the forward market formed by futures and options contracts, there is already a high probability that bitcoin will exceed $100,000.00 by the end of the first half of 2025, or even by the end of this year.
JOÃO QUEIROZ "HEAD OF TRADING” AT BANCO CARREGOSA