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The recent surge in Bitcoin’s price following the US elections can largely be attributed to the market’s confidence in the President-elect’s crypto-friendly pledges, with a bold plan to establish a strategic national Bitcoin reserve standing out.
Multiple factors are driving the crypto market forward. In addition to expectations for a more crypto-friendly SEC chair to replace Gary Gensler, the launch of Bitcoin ETFs earlier in 2024 has paved the way for significant institutional investment.
“Fundamentally, we got the best outcome for crypto, which is a Republican win. This is seen as very positive for crypto, especially in terms of clear regulations,” said Bohan Jiang, head of OTC options trading at digital asset brokerage Afra.
Jiang explained that the post-vote Bitcoin rally was driven by traders restructuring their portfolios towards crypto assets, having unwound defensive positions in anticipation of a Harris victory.
Mitchell Dong, founder and managing partner of Pythagoras Investments, a crypto hedge fund, opined that the introduction of Bitcoin ETFs in the US market in January 2024 has “boosted” the recent rally by allowing for greater institutional investment in the crypto market.
“Going forward, I think the rally will continue as Trump tries to deliver on his campaign promises,” said Dong, emphasizing that Bitcoin could benefit significantly from a clearer legal framework.
However, the hedge fund manager also warned that investors should be prepared for high volatility in the crypto market, regardless of the outcome.
Jiang suggested that regulatory clarity could emerge in the coming months, arguing that any such move would likely lead to a “massive influx of capital into the digital asset ecosystem” from institutional investors.
Looking ahead, Jiang cautioned that the Bitcoin market could still be rattled by various shocks, including macroeconomic and geopolitical factors, and even the performance of MicroStrategy, a significant Bitcoin investor.
MicroStrategy, currently one of the world’s largest Bitcoin holders, has contributed to the recent rally through a continuous “feedback loop” where they leverage stock price gains to buy more Bitcoin, Jiang explained.
The Nasdaq-listed technology company now holds over $30 billion in Bitcoin, having started investing heavily in the cryptocurrency in 2020 when the price of one Bitcoin was below $12,000.
Over the past four years, MicroStrategy has employed various methods to finance its Bitcoin purchases, including stock sales and debt issuance, resulting in a more than 3,000% increase in its stock price since its first significant Bitcoin investment in August 2020.
According to a recent announcement from the company this week, MicroStrategy plans to raise an additional $42 billion in new capital to purchase Bitcoin over the next three years.
Jiang noted that any reversal in the momentum that has driven MicroStrategy’s growth would significantly impact Bitcoin’s value by removing a primary source of liquidity from the market.
Market participants now anticipate Bitcoin reaching the psychological mark of $100,000 in a rally that saw Bitcoin’s price surge by 46% in the previous month. “The market wants that; it’s a huge psychological factor,” Jiang said.
“I’ve heard price targets ranging from $120,000 to $200,000 by 2026. Our view is more nuanced,” he emphasized.
“More drama and more adventure is our outlook,” added Dong, who believes that the crypto market is always subject to high volatility. “Every day you wake up is an adventure, every week is a new drama, and every month is like a pattern change,” he said.
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