As a seasoned crypto investor with a decade of market experience under my belt, I can’t help but feel a mix of anticipation and caution as we approach President-elect Donald Trump’s inauguration in 2025. History has shown that the post-election rally often cools off once the new president takes office, particularly when the incumbent is a Republican, as is the case this time around.
After the inauguration of U.S. President-elect Donald Trump on January 20, 2025, it’s possible that the upward trend in the cryptocurrency market may start to decelerate, based on past trends observed in the market during U.S. election years.
It appears that in the United States, both traditional stocks and digital currencies like Bitcoin (BTC) tend to increase in value during the weeks following a presidential election. However, their performance seems to slow down once the newly-elected president begins their term, based on data from Bloomberg and Macrobond Financial.
It’s particularly noticeable when the current president belongs to the Republican Party, as suggested by data from TS Lombard, a research firm. Generally, the Republican Party is viewed as more favorable towards businesses, leading to increased optimism in the financial markets following an election.
If the S&P 500 surpasses our predicted year-end target of 6100, which represents a 5% increase from the day of the election, investors should consider gradually reducing their holdings during a postelection rally, as suggested by Scott Chronert, Citi’s US equity strategist, in a research note published in November.
The data shows market performance rebounding after an initial post-inauguration correction.
Post-election rally
On December 2nd, I found that the S&P 500 index had reached approximately 6,047, representing a notable increase of almost 4.5% from its level on November 5th, as per the data provided by Google Finance.
After Trump’s election victory, cryptocurrencies experienced substantial growth, with some experts suggesting that his presidency would be advantageous for the sector, according to CryptoMoon Research.
The surge in Bitcoin’s price has been particularly significant, as it experienced over a 30% increase following the elections, making it the world’s leading cryptocurrency. Similarly, Solana (SOL) saw comparable growth.
Some experts predict that Bitcoin’s upward trend might persist following the inauguration, but they warn of potential hiccups. As stated by Ryan Lee, the head analyst at Bitget Research, there’s a possibility that the Bitcoin price may experience a dip as severe as 30% before it resumes its bullish momentum.
The analyst indicated to CryptoMoon on Nov. 27 that, based on historical patterns, there’s a strong possibility that the value of Bitcoin could decrease by approximately 30% prior to reaching its peak for this cycle.
Such a correction would hypothetically tank Bitcoin to around $70,000 per coin.
It’s anticipated by investors that the growth of cryptocurrencies will persist through 2025 and reach its highest point during the latter part of the year, as reported by MV Global, a company specializing in Web3 investments, to CryptoMoon.
Weakening correlations?
Previously, Bitcoin was often viewed as a high-risk investment strongly associated with U.S. equities, specifically the tech-heavy Nasdaq market. However, over the past few months, this connection appears to have lessened based on findings from Binance Research.
Binance reported that as of March 2024, the relationship between Bitcoin and the Nasdaq, measured over a 30-day period, has fallen to 0.46, which is among the weakest connections observed in the past five years.
Even though Bitcoin has a strong correlation of almost 50% with U.S. stocks, it still indicates a significant risk for Bitcoin if there’s a wider market decline.
The relationship between Ether (ETH) and the Nasdaq is particularly strong, as indicated by a correlation coefficient of approximately 0.66, based on data obtained from MacroAxis.com.
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2024-12-03 00:28