Historical Highs and Market Dynamics
Bitcoin is experiencing a remarkable comeback after a long period of volatility. As of November 12, Bitcoin is trading near the $90,000 mark, having recorded levels around $87,000. Earlier in the day, the digital currency achieved a new all-time high of $89,900, reflecting a significant increase of 25% over the past week alone.
It is worth noting that this upward trend pushed the total value of the cryptocurrency market to exceed $3 trillion on November 12, although it subsequently stabilized at around $2.97 trillion.
The Fear and Greed Index, a tool that measures investor sentiment, rose to a very high level of 86, indicating a phase of extreme greed — the highest level since March 2024, when the index temporarily reached 92, just before Bitcoin's previous all-time high.
The Positive Trend in the Cryptocurrency Market: The Relationship with Political Developments
The cryptocurrency market is experiencing a wave of optimism closely linked to political developments. With Donald Trump approaching a return to the White House, many in the cryptocurrency sector hope for a regulatory environment that may be more accommodating.
Trump's victories came with promises of cryptocurrency-supportive policies aimed at reducing the regulatory obstacles that have kept many crypto companies in an unstable position.
What Are the Next Market Trends?
With these factors in mind, many are wondering about the direction the market might take in the coming period. Let us review the data and indicators driving this historic moment in the world of cryptocurrencies and see what clues they can provide about the future.
- Market Data: Recent rises in Bitcoin and other currency prices indicate strong momentum, reflecting increased investor demand.
- Economic Indicators: Trump's potential policies may stimulate institutional investments, increasing stability and confidence in the market.
- Sentiment Analysis: Positive sentiment among investors tends to strengthen trading activity and innovation in the cryptocurrency space.
Trump's Promises Regarding Cryptocurrencies: Focus on New Transformations
Donald Trump's return to the Oval Office signals a major shift in the cryptocurrency landscape in the United States, surprising those who remember his previous critical stance toward digital assets.
Historically, Trump was vocal in his opposition to cryptocurrencies, describing Bitcoin as a "fraud" and warning that it threatens the global dominance of the dollar.
However, his positions underwent a significant shift before the 2024 presidential elections. Trump is no longer merely rejecting cryptocurrencies; he appears ready to position them as a core element of his economic agenda.
During his campaign, Trump expressed support for cryptocurrencies and committed to reducing regulatory barriers — a position embraced by his Republican allies in the Senate.
He even proposed creating a "strategic Bitcoin reserve," suggesting that Bitcoin seized from criminal activities should be held by the government rather than auctioned off.
This concept, championed by Senator Cynthia Lummis, has attracted attention as a means to position Bitcoin as a national asset, which could provide a shield against inflation and the national debt.
Trump's Plans to Change the Cryptocurrency Landscape
Trump's plans extend beyond merely holding Bitcoin; he has also laid out intentions to reshape the US Securities and Exchange Commission (SEC), an agency that has been in long-standing conflict with the cryptocurrency industry.
Trump pledged to change the current head of the agency, Gary Gensler, known for his strict regulatory stance, which led to more than 100 enforcement actions against cryptocurrency companies.
Industry advocates argue that these companies need regulatory clarity rather than punitive measures, and Trump's approach may represent a shift toward a more industry-aligned direction.
Moreover, Trump expressed his ambitions to make the United States a leader in Bitcoin mining, targeting the transfer of dominance from countries such as Kazakhstan and Russia. His vision includes turning the United States into a "Bitcoin mining hub" and promoting Bitcoin as a product that should be "Made in America."
In another notable commitment, Trump pledged to protect Americans' right to self-custody — a fundamental principle in the cryptocurrency world that allows individuals to manage their assets independently.
He also aims to prevent any attempts to create a centralized digital currency in the United States, citing concerns that such a currency could undermine financial privacy.
Establishing a Cryptocurrency Advisory Council
To guide these initiatives, Trump proposed establishing a "cryptocurrency advisory council," bringing together industry experts and cryptocurrency community leaders to help him shape policies that encourage growth rather than restrictions.
If these plans materialize, they could position the United States as a global leader in cryptocurrency-friendly policies, fostering innovation and attracting investments across the industry.
The Federal Reserve's Influence
On November 7, the Federal Reserve cut its benchmark overnight lending rate by 25 basis points, making the target range between 4.50% and 4.75%.
Although this cut is smaller than the half-point reduction made in September, it signals a continuation of the shift toward a more cautious approach to managing inflation while seeking to maintain a strong labor market.
These policy adjustments reflect the Federal Reserve's evolving perspective, as inflation rates approach their 2% target, accompanied by slight signals of a softening labor market.
Notably, the Federal Reserve's latest statement now indicates that "the risks to achieving its employment and inflation goals are roughly balanced," a more relaxed position compared to September's language, which indicated a more urgent focus on controlling inflation.
The Impact of Interest Rate Cuts on Cryptocurrency Prices
Historically, interest rate cuts have had a significant impact on cryptocurrency prices. By lowering interest rates, the Federal Reserve seeks to stimulate economic activity, encouraging both consumers and businesses to borrow, invest, and spend more.
According to the CME FedWatch tool, there is currently a probability exceeding 65% of another 25 basis point cut in December, which will lead to further rate cuts.
Analysts, including Charlie Bilello, expect more interest rate cuts through 2025, with projections indicating a potential range of 3.75% to 4% by June 2025.
The Impact of Interest Rate Cuts on the Cryptocurrency Market
In the cryptocurrency market, the trend toward interest rate cuts can push asset prices upward, as cheaper borrowing costs make high-risk investments, such as cryptocurrencies, more attractive to investors seeking higher returns.
Global Central Banks Join the Rate Cutting
The United States is not alone in cutting interest rates. Central banks around the world have been easing monetary policies, a trend sweeping economies from Asia to South America.
Countries such as Hong Kong and Saudi Arabia have followed the Federal Reserve's lead, each cutting interest rates by 25 basis points, making Hong Kong's interest rate 5.00% and Saudi Arabia's 5.25%.
Even Peru, which has been particularly active, made its eleventh cut, lowering interest rates to 5.00%.
According to data from Charlie Bilello, of 31 major countries, only nine chose to raise interest rates since February 2023. The vast majority have moved toward cutting rates, reinforcing the global movement to make borrowing cheaper and encourage spending and investment.
The Shift in Monetary Policies in the Euro Zone and Its Impact on the Cryptocurrency Market
Even the euro zone, which had been cautious about cutting interest rates, has shifted toward a more accommodating stance, mirroring the US approach to supporting the economy.
For the cryptocurrency market, the global wave of interest rate cuts could have exciting effects. When borrowing costs are low worldwide, capital can flow toward high-yield assets such as cryptocurrencies.
Moreover, as interest rates fall in more countries, weaker local currencies may lead to increased demand for "digital stores of value" such as Bitcoin.
Increasing Global Liquidity, But Fragility Remains
The cryptocurrency market, alongside high-risk assets, is currently experiencing a wave of enthusiasm, although the underlying drivers of this rise are complex and, in some respects, fragile.
Global liquidity is considered a key factor fueling this momentum, with data indicating that the total money supply circulating in the economy rose by 4.37% this week alone. As a result, the global liquidity index rose from $125.764 trillion to $131.263 trillion.
The Impact of Increased Liquidity on Market Sentiment
The increase in liquidity has helped boost positive sentiment, especially in assets like Bitcoin, which respond significantly to changes in global money flows. However, this liquidity surge is somewhat fragile and is mainly dependent on what is known as the "collateral multiplier."
The Concept of the Collateral Multiplier
Simply put, the collateral multiplier shows how much money banks can lend based on the assets they hold as collateral. When the multiplier strengthens, banks can increase the volume of lending, temporarily boosting liquidity.
But this is not considered a fundamental improvement in economic health; it is a short-term measure that supports financial conditions — like scaffolding around a structure that may lack lasting stability.
Potential Risks from China
One potential risk lies in China, where credit growth — including bank loans and other forms of liquidity — has slowed. In October, bank loans were weaker than expected, and liquidity showed a declining trend.
As one of the world's largest economies, any slowdown in Chinese liquidity can have significant effects on global markets, pointing to potential challenges ahead.
Without strong credit growth in China, it may become difficult to sustain current global liquidity levels, which could undermine investor confidence.
The Calculated Approach of Central Banks
Central banks add another layer to this scenario. While interest rates are trending downward in many regions, central banks are refraining from aggressively injecting liquidity as they did in previous years.
This restrained approach means there is no guarantee of sustaining liquidity levels, which could create obstacles for high-risk assets like cryptocurrencies if liquidity declines.
Historical Bitcoin Cycles and the Future Path
As we approach the coming weeks, several indicators suggest that the cryptocurrency market — particularly Bitcoin — may face both opportunities and challenges.
The Price Discovery Cycle
Historically, Bitcoin's journey toward "price discovery" — the period during which prices surpass previous levels and explore new territory — has seen early rises followed by corrections.
For example, in the 2017 bull cycle, Bitcoin experienced a rise for about 8 weeks before facing a deeper decline. Similarly, in the 2020/2021 cycle, there was a correction after 4 weeks of upward movement.
Future Expectations
According to Rekt Capital's analysis, we are now in "only the first week," meaning Bitcoin may still have the opportunity to achieve a strong rise before we see any major correction.
Also
While investors prepare for potential rises in the Bitcoin market, they must be aware of the risks associated with economic volatility and upcoming data. Being prepared to face potential corrections can help manage risks better in this changing environment.
Rise in Assets Under Management of Bitcoin Funds
The assets under management of Bitcoin exchange-traded funds rose by $6 billion in a single day, with $1 billion from new inflows and $5 billion from the rise in Bitcoin's price. Now, Bitcoin funds are approaching surpassing gold funds in assets, having reached 72% of that goal.
Inflation Concerns
Finally, some analysts express concern that Trump's policy proposals may increase inflationary pressures over time. If inflation rises by 2025, this could limit the Federal Reserve's ability to continue cutting rates aggressively.
This means that while the short-term environment may favor cryptocurrency investments, long-term expectations will depend heavily on how inflation evolves and how the Federal Reserve responds to it.
