Donald Trump was to be a saving of the cryptocurrency industry. Now, however, on the market you can hear complaining about how it works. So will the new US president eventually disappoint his supporters?
Donald Trump – And it was supposed to be so beautiful!
Donald Trump came to power with slogans, among others strengthening the cryptocurrency market. And in fact, when he lived in the White House, he began to act quickly. More precisely: to announce that it works. For now, his administration is preparing regulation projects and analyzes whether it is worth creating a bitcoin strategic reserve. So far, we have words and few deeds, although it should be taken into account that the Republican has been governing for a month. In addition, not only the White House can affect cryptocurrencies.
Just before we go further, it is worth pointing out how US policy can affect the BTC course. I will consider what the Fed and the White House can do here. Bitcoin is a value, the price of which depends on the decisions of central banks, and in particular the federal reserve. The monetary policy of this latter institution is crucial for global financial liquidity, which directly translates into the attractiveness of Bitcoin as an alternative form of investment. There are several mechanisms through which the Fed’s actions affect the BTC course:
- Interest rates – Fed increasing interest rates increases the cost of the loan and causes the outflow of capital from risky assets, including cryptocurrencies. When the feet are high, investors prefer safe tax bonds instead of speculative investments in Bitcoin. In turn, interest rate reductions are conducive to BTC growth, because cheap money and growing liquidity prompt investors to look for higher returns.
- Quantitative loosening policy (QE) – when the FED decides to reprint money and increase liquidity in the economy, anti -inflationary assets such as Bitcoin are gaining value. Investors are afraid of devaluation of the dollar and are looking for assets that can protect their capital from loss of purchasing power.
- Fed rhetoric – even the Fed’s messages and forecasts can affect the BTC course. The announcements of the restrictive monetary policy may cause drops on the cryptocurrency market, while pigeons attitude (i.e. readiness to lower your feet or further print money) can cause increases.
Added to this is what a white house can do. It is particularly interesting today what we can expect in terms of customs policy. Trump does a lot to unleash the global trade war. Customs wars, i.e. increasing customs and restrictions in international trade, may have a significant impact on the BTC course, although the mechanisms of this impact are more complex than in the case of Fed’s policy. Here are some potential effects:
- Economic uncertainty – an increase in commercial tension between the US and other countries, especially China, leads to an increase in global uncertainty. In such moments, investors are looking for alternative ways to store values, and Bitcoin can potentially act as a “digital safe shelter”.
- Inflation pressure – the increase in duties often leads to an increase in the prices of imported goods, which can contribute to inflation. If inflation is growing and central banks do not react accordingly, Bitcoin can become an attractive anti -inflationary asset.
- Problems with the flow of capital – in countries affected by sanctions or commercial restrictions Bitcoin can become an alternative way of sending and storing values. In the case of escalation of trade conflicts, some entities may reach for cryptocurrencies more often to bypass financial restrictions.
- Increase in the value of the dollar – if customs wars weaken the economies of other countries more than the US, the dollar may be strengthened. A strong dollar often leads to falls on the Bitcoin market, because investors then prefer stable assets denominated in USD.
As you can see, the Fed and Customs Customs Policy have a significant impact on the Bitcoin course, although their impact may be different depending on the macroeconomic context. Today, Bitcoin is susceptible to the activities of central banks and global commercial tensions.
BTC reserve
Something else is applied to such a complex image – Trump’s plans regarding the creation of the US Bitcoin reserve. About This topic I asked Ryan Lee, the main analyst at Bitget Research:
The potential creation of an American state property fund under Trump, with possible allocations in Bitcoin, can significantly improve market moods and even more legitimize cryptocurrency as a category of assets. This development can attract increased institutional investments, positioning Bitcoin as a strategic value and potential protection against economic risk, including the effects of the ongoing trade war. However, the actual impact will depend on the level of the Fund’s exposure to Bitcoin and the prevailing macroeconomic conditions. It also introduces new variables, such as political and regulatory risk, which can contribute to increased price variability.
Meanwhile, the escalation of commercial tensions will probably affect the trajectory of Bitcoin prices in the near future. In scenarios of increased economic uncertainty or market instability, BTC may become a protection against currency devaluation and inflation, potentially driving prices. And vice versa, a serious economic slowdown or increased risk aversion can cause sales in the wide market, and Bitcoin is not completely resistant to such corrections. Nevertheless, the relative independence of Bitcoin from the traditional market dynamics can help alleviate some of these effects, emphasizing its evolving role on global financial markets.
Landscape before the storm?
So we have a few elements. The Fed affects its activities on BTC. In this field, we can receive fuel for growth in 2025, because the central bank should and continue the cutting of percentage rates, but also start quantitative loosening: increase its balance of assets and in exchange add liquidity to the market – “throw away” from the dollar balance.
Trump himself can affect BTC in different ways. By pressing the Congress and its officials, it can strengthen the cryptocurrency industry using regulation. At the same time, however, too aggressive customs policy can lead to considerable geopolitical tensions that will affect BTC rather negative. In an extreme case, it can lead to the outbreak of war with China, which would be – especially in the first period of conflict – even deadly risky assets for the market.
On the other hand, if you manage to create a bitcoin strategic reserve, the market will receive a powerful signal for growth.
What about this Trump? It depends…
So it is clear that Trump’s presidency can affect the BTC course in different ways. Investors, however, should be particularly interested in what the Fed does, which is independent of the White House. Today, more and more facts speak for the fact that the cryptocurrency market is dependent on liquidity and monetary policy. When we receive a signal from Jerome Powell about the fact that the reprint begins again, we can expect a strong staff to be broken.
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