Key Takeaways
- The crypto community has built a lot of enthusiasm around the January 20 Trump Inauguration.
- The expected crypto regulatory framework could delay and dampen the spirit of the crypto community.
- A decision by the US FED to print money to plug a $612 billion cash crunch could play into the crypto market and spur a bull run in Q1 2025
A US Federal Reserve (FED) decision under the incoming US President Donald Trump to plug a $612 billion cash crunch could catalyze the crypto industry towards a Bull Run during the first quarter of 2025. Such a move would mitigate investor concerns as they anticipate the implementation of a new crypto regulatory regime in the United States.
New Crypto Regulatory Framework Could Be Delayed
According to the latest market data, the price of Bitcoin lost some 6% during early trading on January 8, which saw the flagship cryptocurrency fall below the $100,000 mark. While the crypto community had built a lot of enthusiasm around President-elect Trump’s January 20 inauguration and its prospects of catalyzing the entire crypto industry, there’s every chance that a delay in implementing the highly anticipated crypto regulatory framework could dampen investor confidence and rattle Bitcoin’s valuations.
However, according to BitMEX co-founder Arthur Hayes, the US Treasury under the incoming Trump administration will quickly expect an additional $612 billion to cover existing market liquidity. Hayes believes an extra $612B within Q1 2025 could counterbalance the anticipated regulatory disappointment. In a January 7 blog post, Hayes stated, “An extremely positive dollar liquidity environment can cover a letdown by team Trump on his proposed pro-crypto and pro-business legislation, an increase of up to $612 billion in the first quarter.”
Renewed Institutional Liquidity Could Reignite Bitcoin Rally
Crypto analysts are building optimism about a potential Bitcoin rally despite the regulatory disappointment that could follow soon after Trump’s inauguration on January 20. Some analysts have projected the next Bull Run cycle to exceed $150,000 towards the end of 2025. The said Bitcoin rally would be driven by an anticipated $20 trillion boost in the global money supply, potentially attracting over $2 trillion worth of investment into the Bitcoin ecosystem. According to Hayes, the anticipated price correction will be directly linked to the Trump administration’s delay in implementing a crypto policy.
According to Binance Research, the most recent price correction was most likely the result of reduced institutional activity during the just-ended holiday season. With institutional investors expected to get back into the market at the beginning of the year to redeploy their capital, there’s a chance an institutional liquidity boost could reignite a Bitcoin Bull run and help BTC surpass the $100,000 before the January 20 Trump Inauguration. Binance Research stated, “While” BTC can recapture $100K ahead of the Trump inauguration on expectations of positive crypto regulation, the market will need to see continued supportive conditions to maintain such levels.”
Conclusion
The US FED, responsible for shaping the US money policy and setting interest rates, is the world’s most powerful central bank. As Bitcoin becomes increasingly integrated into the worldwide financial markets, BTC’s movements are mostly tied to the FED’s policies nowadays. FED Chair Jerome Powell has recently thrown crypto investors into a guessing game with decisions that have the potential to significantly impact the cryptocurrency market. Despite the FED’s stance, the broader crypto market is in the middle of the Bitcoin Bull Run that saw BTC achieve the six-figure mark, and any decision to increase the money supply could see the market reacting positively in Q1 2025.
