The cryptocurrency market has skyrocketed. Bitcoin moves at all-time highs. Alternative cryptocurrencies accumulate increases of 600% in a matter of days. No, we are not in 2021: the last days of 2024 are passing and crypto finance is experiencing déjà vu… with nuances. The new bitcoin fever is not only driven by speculation based on its potential as a currency, but also by growing institutional adoption and the regulatory advances brewing in Washington, which could generate a cascade effect across half the planet.
One of the most obvious keys to the crypto resurgence is Donald Trump. The Republican will manage the world’s main economy starting in January after basing part of his campaign on the promise of turning it into “the crypto capital of the planet and the world’s bitcoin superpower.” “I am the crypto candidate,” he defended after having distrusted cryptocurrencies for years.
The bet paid off. Trump raised more than $130 million in donations from the crypto industry for his campaign, including one from 30 million. This is without counting the support of Elon Musk himself, a fervent defender of the potential of these assets, who put another 100 million out of his pocket and X’s algorithms at the service of the Republican.
Bitcoin has reacted to its victory with an appreciation of more than 40%. After a few days oscillating on the border of 95,000 dollars, this Thursday it passed the psychological barrier of 100,000. A step that many gurus predicted for 2022 but that was truncated by the explosion of the crypto bubble, which volatilized two billion euros invested in these assets. The prediction ended up coming true three years later, on the eve of the coming to power of the first US president convicted of 17 crimes.
“Donations from companies related to the ‘cryptoverse’ have been extremely popular during this election campaign, softening previously aggressive positions against crypto (especially on the Republican side, but also on the Democratic side),” explains David Tercero-Lucas, Professor of Economics at the Pontifical University of Comillas – ICADE. “We are seeing that the Trump administration is going to be (or is) very pro-crypto on a myriad of issues (soft regulation, taxes on crypto profits, etc.),” he adds.
The sector considers it an investment. “As a result of this past election, we will have the most pro-crypto Congress that has ever been elected, but also the most pro-crypto administration that has ever been in power,” congratulated Kristin Smith, director of the Blockchain Association, a crypto employer association that has 98 members. “The strategy is to have as many conversations with as many people in Trump’s orbit as possible, so that everyone has an understanding of what the crypto industry is most interested in,” he described.
It is not the first time that bitcoin celebrates the election of a new president. Biden’s 2020 election victory also precipitated a rally in bitcoin, whose price soared 149% from Nov. 5, 2020, to Inauguration Day the following January. Those hopes were dashed by an administration openly hostile to the growth of this sector. However, now the industry is beginning to see winks from Trump. The appointment of Paul Atkins as the new head of the US stock market regulator (the SEC) has been assumed as a clear message of relief from current financial regulation and a position in favor of digital assets.
Institutional investment and normalization of bitcoin
These elections, however, catch the crypto industry in another market position. Now it is taking root with traditional companies: more and more companies and funds use these assets as a way to diversify their portfolios and as a means of protection against devaluation, a “safe haven” against monetary depreciation, driven by public spending policies and issuance of debt.
“Obviously Trump’s victory and the fact that he promises what he has promised has an influence. But the fact that we have companies that are incorporating it into their treasuries as a monetary hedge, such as Tesla, Square or Blackrock, is making many others see it as a strategy that can work,” says Javier Molina, eToro analyst. “Whoever is buying it is no longer the crypto-believers or the cryptocurrency geeks, but these funds.”
The expert points out that the SEC’s decision to allow exchange-traded funds to be exposed to bitcoin has ended up normalizing its position as an asset. Therefore, he states that its price is now more affected by the same macroeconomic factors that affect the stock market. “Almost more important than seeing what Trump does is seeing what happens with the risk markets and that the Nasdaq [el índice que agrupa a las mayores empresas tecnológicas, como Apple, Microsoft y Amazon] “Don’t get deflated.”
The situation does not prevent the extreme volatility that was previously associated with bitcoin from occurring with many other alternative cryptocurrencies. One of those that has multiplied its value in a few days has been Hedera, based on a technology different from blockchain that, its creators claim, consumes little energy.
“It is true that it seems that an important part of the rise is due to institutional investment (although we need more specific research on the subject),” acknowledges David Tercero-Lucas. “However, it is extremely likely that inexperienced profiles have entered en masse seeing that the growth expectations of cryptocurrencies, in the absence of an international shock, are positive in the short term,” he warns.
It is extremely likely that inexperienced profiles have entered en masse seeing that crypto growth expectations are positive in the short term
David Tercero-Lucas
— economics professor specialized in cryptocurrencies
“He fear of missing out [miedo a quedarse fuera] It is contagious in a market that has, a priori, such great returns (positive now, negative when we enter another “winter”)”, continues the professor. “The main problem for these investors is that several “whales” [grandes tenedores de criptomonedas con capacidad para influir en todo el sector] “They can (and will) move the market when they decide to take out the money.”
Three years later, enthusiasm is once again surrounding the crypto market. Although some of the fraud and swindling lawsuits against the top businessmen who fueled the previous bubble continue to draw convictions, the meteoric rises are attracting inexperienced investors again. Your first reality check could be Trump’s own mandate and how committed he is to his promises to the crypto market.
“Part of the administration has previously been pro-crypto (more numerous congressmen and senators) so I do see this initial euphoria justified,” says Tercero-Lucas, who points out the key to the new president of the SEC. “At the same time, Trump said that he wanted the United States to be the capital of Bitcoin, so he would not rule out regulation that encourages mining bitcoins (or gives incentives to do so) and reduce taxes on profits from buying and selling crypto. However, it will be one of the minor issues of the legislature, in which the trade war will dominate,” he concludes.
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