(Kitco News) – Traders embraced a risk-on sentiment following Donald Trump’s re-election as president, with Bitcoin and the major stock indices rallying to new record highs while precious metals experienced a sell-off.
“Following the election results, we've observed a noticeable uptick in risk assets ranging from cryptocurrencies to equities,” said analysts at Secure Digital Markets. “Notably, Bitcoin surged to a new record high of $75,500, spurred by market anticipation of a regulatory easing under the new administration.”
“The cryptocurrency sector experienced a [9.5%] increase in market capitalization, with particular outperformance noted in DOGE and other meme coins,” they noted, adding that crypto-related stocks also saw significant gains.
“This optimism is largely fueled by Trump's campaign portrayal as a pro-crypto candidate, which suggests a potential easing of U.S. regulations impacting the crypto space,” they said. “The political climate in the U.S. appears increasingly favorable towards cryptocurrencies, potentially speeding up their adoption into the mainstream.”
At the closing bell, the S&P, Dow, and Nasdaq all finished well into the green, up 2.53%, 3.57%, and 2.95%, respectively.
It was the opposite story for precious metals, however, with both gold and silver trading down more than 3% at times during the session. At the time of writing, spot gold trades at $2,659.90/oz for a decline of 3.05% on the session, while spot silver is down 4.55% and trades at $31.13/oz.
The pullback in precious metals comes as the DXY and the U.S. 10-year Treasury yield rallied, but the pressure eased in the afternoon after they pulled back from their daily highs.
Data provided by TradingView shows that Bitcoin (BTC) saw another surge in afternoon trading that pushed King Crypto above $76,000 for the first time, hitting a high of $76,528 before pulling back into consolidation.
BTC/USD Chart by TradingView
“Historical data from election years, including 2012, 2016, and 2020, shows Bitcoin achieving returns of approximately 90%, 40%, and 150% respectively in the 90 days post-election, aligning with Bitcoin halving years and often corresponding with shifts in Federal Reserve policies,” Secure Digital Markets analysts noted. “This year, the market is poised for potential reductions in interest rates.”
At the time of writing, Bitcoin trades at $75,782, an increase of 8.98% on the 24-hour chart.
Expectations for clearer regulations
Analysts widely cite expectations for a clearer regulatory framework around cryptocurrencies after Trump’s election as the impetus for the Bitcoin rally.
“With the recent election outcome, the digital asset industry faces a pivotal moment,” said Fireblocks CEO Michael Shaulov. “While the regulatory approach of the new administration remains to be seen, we’re encouraged by the bipartisan momentum supporting stablecoins and other blockchain innovations.”
“This ongoing support bodes well for the stablecoin bill’s progress and broader regulatory clarity, which are essential for continued growth,” he added. “Regardless of political shifts, the resilience of crypto is evident. The U.S. has the talent and the drive to lead in blockchain, but secure banking access and clear regulations are critical.”
“We are expecting a new wave of hope to enter the market now that Donald Trump has been re-elected,” said analysts at Bitfinex. “Given that part of his campaign strategy was to impress on crypto investors in the US that he recognized that many of their views aligned with his own thought processes, he is expected to be positive for the industry.”
“We expect that in the short term, a significant amount of capital will now be unlocked for crypto ventures,” they added. “In addition, there is likely to be an impact on the approach that has been taken by the SEC, which many believe to have been hostile to the crypto industry.”
That said, crypto proponents shouldn’t expect the changes to take place overnight as it is still two months until Trump gets inaugurated, and from there, things will have to go through the normal legislative process.
“Trump also had promised that the US should be developed into a global hub for crypto projects and markets,” Bitfinex analysts said. “However, we do not expect any action in the short-term, particularly as multiple complex issues need to be resolved, including whether certain crypto assets should be classified as a security.”
According to Greg Magadini, Director of Derivatives at Amberdata, “Given this election outcome, there are 3-key investment themes for Bitcoin going forward.”
“The first theme is the Pro-Bitcoin stance Trump has personally displayed, such as supporting the Bitcoin Mining industry and potentially creating a government strategic reserve for Bitcoin,” he said. “The reserve is unlikely, but the sentiment of a reserve is very bullish. (Let’s not forget the idea of ‘no tax on Bitcoin,’ which would make the asset class even more interesting to invest in).”
The second theme is regulatory certainty, he added. “The Trump administration and 219+ pro-crypto candidates and counting have now been elected to the House and Senate. This enables large institutions the ability to invest in Bitcoin related ETFs and equities. VC to invest in protocols and projects. This is the medium to long-term bullish impact.”
The final theme is that “Asset volatility will drop back down after in the medium term… but enthusiasm is explosive in the short-term as Spot prices rally past all-time-highs… with sights on $80k-$90k Bitcoin by EOY,” Magadini said.
“One of the biggest Medium term effects of the Trump presidency will be the relaxation of regulation against builders in the space,” he underscored. “Freeing Ross Ulbricht and firing Gary Gensler enables protocol builders to feel confident the government isn’t against them. This is very constructive for ‘L1 chains’ such as Eth and Solana, whose value is derived from protocols being built and used on the L1.”
“DeFi will be a massive winner out of this,” he added. “We might even get a relaxation of US citizen restrictions against protocol use. Polymarket has been often quoted by the president’s allies during this election cycle, we might enable a path for protocols like Polymarket to be compliant for US resident users. This means that although the momentum is behind Bitcoin right now, in the medium term, we can see a rotation into Altcoin investing and outperformance.”
As for what to expect from Bitcoin volatility and price-wise, Magadini highlighted that “dealer positioning for options on Deribit [shows] the market is heavily positioned for Bitcoin to settle between $80k-$90k by EOY. The options market is pricing in only a 7% chance of being above $100,000 by the EOY.”
Altcoin traders embrace risk-on
It was a sea of green in the altcoin market as the only tokens in the top 200 to record losses on Wednesday were gold-pegged stablecoins.
Daily cryptocurrency market performance. Source: Coin360
First Neiro on Ethereum (NEIRO) was the breakout winner, surging 53.4%, followed by gains of 30.8% for both Uniswap (UNI) and Lido DAO (LIDO). PAX Gold (PAXG) and Tether Gold (XAUT) followed gold’s price lower, declining by 2.9% and 2.7%, respectively.
The overall cryptocurrency market cap now stands at $2.48 trillion, and Bitcoin’s dominance rate is 60.6%.
