Key Points
- Bitcoin (BTC) is experiencing a resurgence, with the total crypto market cap exceeding $3 trillion, driven by political developments and investor sentiment.
- Donald Trump’s return to the White House and his pro-crypto policies are fueling optimism in the crypto market.
Bitcoin (BTC) is enjoying a significant revival after a period of volatility.
As of November 12, BTC is trading near $90,000, having reached a new all-time high of $89,900 earlier in the day.
Crypto Market Dynamics
This bullish trend has pushed the total crypto market capitalization beyond the $3 trillion mark, although it later stabilized around $2.97 trillion.
The Fear and Greed Index, a tool that measures investor sentiment, has risen to a score of 86, indicating a period of extreme greed.
The current wave of positivity in the crypto market is largely linked to political developments, particularly with Donald Trump set to return to the White House.
The crypto sector is hopeful for a regulatory environment that could be more favorable under Trump’s administration.
Trump’s Crypto Policies
Trump’s victory comes with promises of pro-crypto policies aimed at reducing the regulatory hurdles that have kept many crypto businesses on uncertain ground.
Donald Trump’s return to the Oval Office signifies a key shift for the U.S. crypto landscape.
Historically, Trump was a critic of cryptocurrencies, but his stance evolved significantly in the lead-up to the 2024 election.
He now not only embraces crypto but appears ready to make it a crucial part of his economic agenda.
Trump has expressed support for crypto and committed to reducing regulatory barriers.
He even proposed establishing a “strategic Bitcoin reserve,” suggesting that Bitcoin seized from criminal activities should be retained by the government instead of being auctioned off.
Trump’s plans extend beyond merely holding Bitcoin; he intends to reshape the U.S. Securities and Exchange Commission, an agency that has long been at odds with the crypto industry.
He has pledged to replace the current SEC chair, Gary Gensler, known for his stringent regulatory stance.
Industry advocates argue that these companies need regulatory clarity over punitive measures, and Trump’s approach could represent a departure toward more industry-aligned guidance.
Trump has expressed ambitions for the U.S. to lead in Bitcoin mining, aiming to shift dominance from countries like Kazakhstan and Russia.
In another significant commitment, Trump has pledged to protect Americans’ right to self-custody, a foundational crypto principle that allows individuals to independently manage their assets.
He also aims to block any attempts to establish a central bank digital currency in the U.S., citing concerns that such a currency could undermine financial privacy.
To guide these initiatives, Trump has proposed establishing a “crypto advisory council,” bringing together industry experts and crypto community leaders to help shape policies that encourage growth rather than restriction.
If these plans come to fruition, they could position the U.S. as a global leader in crypto-friendly policy, fostering innovation and attracting investment across the industry.
The Federal Reserve reduced its benchmark overnight borrowing rate by 25 basis points on Nov. 7, adjusting it to a target range of 4.50% to 4.75%.
This cut reflects the Fed’s evolving view as inflation trends closer to its 2% target, accompanied by subtle signs of cooling in the labor market.
Rate cuts have historically impacted crypto prices. By lowering interest rates, the Fed aims to stimulate economic activity, encouraging both consumers and businesses to borrow, invest, and spend more.
Analysts, including Charlie Bilello, foresee additional rate cuts into 2025, with projections suggesting a potential range of 3.75% to 4% by June 2025.
For the crypto market, such a trend toward lower rates can often drive asset prices higher, as cheaper borrowing costs make higher-risk investments, like cryptocurrencies, more appealing to investors seeking potentially greater returns.
Central banks around the world have been easing monetary policies, a trend that’s sweeping through economies from Asia to South America.
Countries like Hong Kong and Saudi Arabia recently followed the Fed’s lead, each cutting their rates by 25 basis points, bringing their respective rates to 5.00% and 5.25%.
Even the Eurozone, which has been cautious about rate cuts, has shifted toward a more accommodative stance, mirroring the U.S. in its approach to economic support.
For the crypto market, this wave of global rate cuts could have interesting effects. When borrowing costs are low worldwide, it can lead to a flow of capital into high-yield assets like cryptocurrencies.
Furthermore, as rates drop in more countries, the weakening of various fiat currencies could also lead to stronger demand for “digital stores of value” like Bitcoin.
The crypto market, along with other risk-on assets, is currently riding a wave of enthusiasm, though the underlying drivers of this rally are complex and, in some respects, fragile.
A key factor fueling this momentum is global liquidity—the overall money supply circulating in the economy. As of Nov. 12, global liquidity has risen by 4.37% this week alone, raising the global liquidity index to $131.263 trillion from $125.764 trillion the previous week.
The liquidity surge has helped boost bullish sentiment, especially in assets like Bitcoin, which is highly responsive to changes in global money flow. However, this increase in liquidity is somewhat precarious, primarily supported by what’s known as the “collateral multiplier.”
A potential risk factor lies in China, where credit growth, including bank loans and other forms of liquidity, has been slowing. In October, bank lending was weaker than expected, and liquidity showed a declining trend.
As one of the world’s largest economies, any slowdown in China’s liquidity can ripple across global markets, signaling possible challenges ahead.
Without strong credit growth in China, sustaining global liquidity at current levels could become difficult, potentially undermining investor confidence.
Adding another layer to this scenario is the measured approach being taken by central banks. While interest rates are declining in many regions, central banks are refraining from aggressively injecting liquidity into the economy as they have in past years.
This restrained approach means there’s no guarantee of sustained liquidity levels, which could create headwinds for high-risk assets like cryptocurrencies if liquidity tapers off.
This situation echoes last year, when market speculation fueled price increases, with liquidity arriving “just in time” to maintain momentum. Currently, investors are looking to Q4 for further liquidity inflows, speculating that any dips could present buying opportunities before the next potential surge.
As we look ahead to the next few weeks, several indicators suggest that the crypto market — and Bitcoin in particular — could face both opportunities and challenges.
Historically, Bitcoin’s journey into “price discovery” — the period when it surpasses previous highs and explores uncharted territory — has seen early rallies followed by corrections.
Looking back, the 2017 bull cycle showed BTC rallying for about 8 weeks before facing a deeper pullback, while the 2020/2021 cycle saw a correction after 4 weeks of upward movement.
According to Rekt Capital, “It’s only Week 1 right now,” which means Bitcoin might still have a strong upward run before we see any substantial correction.
Still, it’s wise to stay cautious and not assume the climb will be uninterrupted. Cycles like this tend to bring excitement, but history shows us that pullbacks are part of the journey.
Another potential bump in the road may come from macroeconomic data. This week, all eyes are on the U.S. Consumer Price Index report, a key inflation gauge, expected to show a slight increase in headline inflation to 2.6% from 2.4%, while core inflation may hold steady at 3.3%.
Any signs that inflation is heating up could influence the Federal Reserve’s stance on rate cuts. A surprising uptick might lead the Fed to reconsider the pace of easing, especially since markets are heavily betting on a 25 bps cut in December.
If inflation surprises to the upside, however, it might challenge the Fed’s room to cut rates, which could strengthen the U.S. dollar and potentially weigh on risk assets like Bitcoin.
Michaël van de Poppe suggests that “a 10% correction toward the CME gap” could occur, especially if inflation data comes in hotter than expected.
Another factor influencing Bitcoin is the rising popularity of Bitcoin exchange-traded funds. As of Nov. 12, Bitcoin ETFs hold over $90 billion in assets, marking a huge milestone.
This figure has jumped by $6 billion in just a single day, with $1 billion from new inflows and $5 billion from appreciation in Bitcoin’s price. Bitcoin ETFs are now 72% of the way to surpassing gold ETFs in assets.
Lastly, some analysts are concerned that Trump’s policy proposals could increase inflationary pressures over time. If inflation picks up by 2025, it may limit the Fed’s ability to continue with aggressive rate cuts.
This means that while the short-term environment could favor crypto investments, the longer-term outlook will depend heavily on how inflation evolves and how the Fed responds.
With inflation risks looming and the Fed’s rate path uncertain, this is a period for careful monitoring rather than unchecked enthusiasm. Trade wisely and never invest more than you can afford to lose.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.