Trump is, undoubtedly, the most pro-crypto president in history. Yesterday, the SEC initiated a task force for clarifying regulation and registration pathways.
But the reality of the legislative process is sinking in. The result isn't a sell-the-news event. Rather, the data suggest we're back to a Bitcoin cycle.
Let's start with $BTC itself.
1 Funding Rates
Funding rates for perp markets show whether investors are too optimistic or pessimistic.
In the image below you can see the funding rates for $BTC, but with an interesting twist: the graph plots the current rates (in orange) against the 3-month average rate (blue line).
Bitcoin's current rate is much below the average, which implies that the market is not overly optimistic (and hence not in immediate threat of a pullback).
2 Is It Alt-Season?
If $BTC is positive, then maybe the rest of the market is? Well, not exactly.
The CMC Alt-Coin index lags a bit. For example, it only registered an alt-season in early December, which was about 3 weeks after everything rocketed up post-Trump's victory.
Still, it catches the big trends, and currently, it's showing what you already know: we are NOT in an alt-season.
3 Memes and Trump
The reason we're not in an alt-season is double. First, we have no outside capital flowing into the space. That would require macroeconomic shifts -- specifically, the end of quantitative tightening and ongoing interest rate cuts.
Second, Trump's meme coins have sucked up all the liquidity in the alt-space for his own coins (see the green box). It is his coin alone that has made significant gains over the past 7 days.
4 What We Need To See
Trump could do at least 3 things immediately to help the crypto space.
First, Circle CEO Jeremy Allaire has suggested that Trump could sign executive orders that would repeal the SEC's Staff Accounting Bulletin 121 -- this is the source of Operation Chokepoint 2.0, which prevented bank involvement with cryptocurrencies.
Second, Trump could sign an order that allows banks to trade cryptocurrencies, offer crypto investments to wealthy clients, and hold digital assets in their portfolios.
Third, he could sign an order making cryptos a national priority.
5 Concluding Thoughts
All things considered, the crypto space isn't in a bad spot. A return to a Bitcoin-dominant regime isn't the worst outcome.
The reality of a Trump presidency is that politics is slow and the rocketship takes some time to fuel.
Trump is likely to do some of the easy stuff, now that most of his net worth is in crypto. It'll just take a bit of time.
Happy Trading!
-Sebastian Purcell, PhD
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