- Analysts are turning their attention from Trump to the Fed.
- A pro-crypto Treasury Secretary would be especially bullish for the industry.
The Bitcoin supercycle is on hold until next year, suggest some analysts.
Since rallying 36% the week after the US election, Bitcoin’s price surge stalled as attention has turned from Trump to monetary policy.
Jerome Powell, the chair of the Federal Reserve, signalled concerns about creeping inflation and indicated that the central bank will keep cutting interest rates, but more slowly.
That means Bitcoin may need to wait until the new year for another boost — and investors should brace for more turbulence.
“For Bitcoin, we’re in the early stages of what looks to be shaping up as a massive bull run,” Cory Klippsten, CEO of Swan Bitcoin, told DL News. “Expect pullbacks of 20 to 40% along the way, but it is a fool’s errand to try to time the top.”
Powell said at the latest Fed meeting that though inflation has plummeted from its record high, the job’s not done.
Consumer pricing data showed a year-over-year rise of 0.2% in consumer costs, the first increase in seven months, suggesting that inflation is still lingering.
Meanwhile, US employment figures are also strong, which reflects a resilient economy.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” concluded Powell.
Capital markets — crypto included — reacted quickly.
The hawkish comments mark a change in language since the central bank kicked off a new rate-cutting cycle in September with a massive half-point rate cut. A day after Powell’s speech, the S&P 500 dropped 1%, the NASDAQ fell 2%, and Bitcoin lost 2%.
“Good news turned into bad news when the Fed stated it’s too early to determine whether it will cut rates at its December meeting,” Greg Magadini, director of derivatives at Amberdata, told DL News.
Trump’s recent appointments — including shock pick Matt Gaetz for attorney general — have also added to the confusion, said Steven Lubka, head of Swan Bitcoin’s institutional investment arm.
“This may have been compounded by uncertainty surrounding Trump’s recent appointments, which have certainly turned heads,” he said, referring to recent market action.
Still, sentiment in stocks and crypto remains very bullish, especially for crypto.
“It’s hard to overstate how much of a shift it is as we’re going from an actively hostile administration to the most crypto-friendly administration the US has seen,” Carlos Guzman, an analyst at market-making firm GSR, told DL News.
Investors weigh Trump picks
The President-elect’s choice for Treasury Secretary — essentially the US government’s chief financial officer — is weighing heavy on crypto investors.
Kevin Warsh, a former Fed official under George W Bush and Barack Obama, is the leading pick on popular betting markets.
The odds of crypto bulls like Howard Lutnick, CEO and chairman of Cantor Fitzgerald, which manages a portion of stablecoin Tether’s massive treasury bill stash, and Scott Bessent, the founder of investment firm Key Square Group, have fallen dramatically in the last day.
Guzman is also keeping a close eye on Trump coming good on his campaign promises, namely setting up a Bitcoin reserve for the country.
“While we still assign a low probability to this happening, we don’t think it is out of the question given Trump’s campaign promises and Senator Lummis’ active support for its creation,” he said.
“If enacted, the sky could be the limit for Bitcoin prices, and alts could follow suit.”
Liam Kelly is DL News Berlin-based DeFi Correspondent. Got a tip? Email at liam@dlnews.com.