Crypto enthusiasts are anxious: Trump is causing problems for them
The world of cryptocurrencies is in a state of unrest, with Donald Trump’s declarations causing ripples throughout the market. Investors are beginning to discern the value of these digital assets, resulting in fluctuating prices in response to Trump’s statements.
Bitcoin, the most well-known cryptocurrency, has experienced significant price movements. Following Trump’s election victory, Bitcoin was valued at $69,733. By January, it skyrocketed to $109,000 before dropping to around $83,000 currently. Despite a 19% increase since the election, Bitcoin has declined 23% from its peak.
Investor sentiment in the crypto market is at an all-time low, with the Crypto Fear and Greed Index dropping from 55 to 21 in less than a week. However, Simon Peters, an analyst at eToro, reminds investors that corrections are normal for any financial asset and that Bitcoin is still up 70% compared to the previous year.
Trump’s involvement in the crypto world has added to the market’s turmoil. His plan to establish a strategic cryptocurrency reserve, including Bitcoin, Cardano, Solana, and Ripple, initially boosted prices but raised concerns within the Federal Reserve. The subsequent executive order formalizing the creation of a strategic Bitcoin reserve funded by judicial seizures disappointed many in the cryptocurrency community and led to a sharp sell-off in the market.
Cryptocurrencies are in a state of consolidation, with Bitcoin leading in both value and dominance. Its market capitalization has increased to $1.63 trillion, significantly higher than its closest competitor, Ethereum, at $249 billion. Other cryptocurrencies, such as Tether, XRP, BNB, Solana, USDC, and Cardano, also follow behind.
Lapo Guadagnuolo from S&P Global Ratings notes the perceived functionalities of various cryptocurrencies in the market. Bitcoin is seen as digital gold due to its deflationary nature, while Ether and Solana are associated with platform application and smart contract use cases. The crypto industry is moving towards maturity and institutional adoption, with projects focusing on digital identity, asset tokenization, and the integration of blockchain with artificial intelligence.
In January of last year, the Biden administration’s approval of spot exchange-traded funds (ETFs) for Bitcoin and Ether brought real momentum to the crypto industry. These funds currently hold $136 billion in assets and are predicted to become the third-largest asset class in the exchange-traded fund industry after stocks and bonds.
While Trump has launched his memecoin $Trump on the Solana platform, which initially surged to $75 but is now valued at $11, the cryptocurrency market remains volatile and speculative. Major investors, like Warren Buffett, are slowly warming up to Bitcoin as a store of value, recognizing its decentralization, security, and global adoption.
Bitcoin’s long-term prospects as a recognized store of value are promising. Its limited supply and resistance to censorship make it unique, especially in the face of inflationary currencies and unstable financial systems. Growing institutional adoption and infrastructure development are further solidifying Bitcoin’s place in the market.
