As a seasoned analyst with over two decades of experience navigating the complex world of finance and technology, I find the latest report from VanEck on Bitcoin intriguing. The shift in adoption trends, coupled with the looming US presidential election and the Fed’s monetary policy, presents an interesting landscape for Bitcoin and the broader digital asset market.
A study conducted by asset manager and crypto ETF provider VanEck, headed by Matthew Sigel and Nathan Frankovitz, delves into the essential aspects, popular usage patterns, and potential price swings of Bitcoin, considering the Federal Reserve’s recent reduction in interest rates and the forthcoming United States presidential election.
Shift In Bitcoin Adoption
As an analyst, I’d note that over the past year, the value of Bitcoin has skyrocketed a staggering 124%, far outpacing most traditional investment classes. In the realm of cryptocurrencies, Bitcoin’s influence—quantified by its market capitalization in relation to the entire crypto market—has expanded by a substantial 15%. This growth has pushed Bitcoin’s dominance to 56%.
Even though the company acknowledges that Bitcoin’s price has significantly risen last year, it points out that the factors influencing Bitcoin’s acceptance have changed. In 2023, Bitcoin saw a remarkable surge of 155%, primarily due to “inscriptions,” a feature enabling users to save media files on the blockchain, thus drawing retail investment and trading fees.
Initially, the company observed a decrease in the frequency of daily Bitcoin transactions (inscription transactions), which dropped by 93%. This decline in activity on the blockchain also caused a drop in the number of daily active addresses and transaction fees. This trend indicates that Bitcoin’s recent price increase might be more linked to its function as a store of value, rather than everyday retail transactions.
This change indicates that more and more institutional investors are employing Bitcoin for storing and moving value. At the same time, Bitcoin-linked stocks have experienced a staggering 87% rise in market value, showcasing the expanding acceptance of Bitcoin as a means for investment.
Fed Rate Cuts And Harris-Trump’s Diverging Paths
Moving forward, VanEck predicts that the interaction between the Federal Reserve’s monetary policies and the political environment will significantly shape Bitcoin and the overall digital asset market.
If the Federal Reserve persists in reducing interest rates due to economic difficulties, then the company expects this situation might foster a beneficial climate for riskier investments like Bitcoin, as it could draw investors looking for increased returns.
The forthcoming U.S. presidential election casts a intricate outlook on Bitcoin’s possible future trajectory. Regardless of whether it’s Vice President Kamala Harris’ administration or that of former President Donald Trump who takes office, they are anticipated to either sustain or amplify spending policies, potentially leading to increased quantitative easing.
This economic stimulus strategy could unintentionally foster conditions that make riskier investments, such as Bitcoin, more appealing. Yet, should any government implement policies perceived as unfavorable to business, it might undermine investor trust and confidence in these assets.
If Kamala Harris decides to keep Gary Gensler as the head of the Securities and Exchange Commission (SEC), or if she aligns more closely with the Democratic Party faction led by Elizabeth Warren, it’s anticipated that the digital asset industry could see increased regulatory scrutiny.
Although there might be some hurdles involved, the asset manager posits that a presidency led by Harris could prove advantageous for Bitcoin over the long term. This belief stems from the idea that a more controlled regulatory landscape could lead to increased transparency and legitimacy within the cryptocurrency sector.
Instead, it’s reasonable to anticipate that a possible Donald Trump presidency might lean towards less government regulation, an aspect that the company thinks could be advantageous for the entire cryptocurrency sector.
Regardless of who wins the presidency, the firm asserts that “the overarching trend” of escalating budget deficits and rising national debt will likely continue. Such conditions typically weaken the US dollar, creating a macroeconomic landscape in which BTC has historically thrived.
At the time of writing, BTC is trading at $62,700, down nearly 3% in the 24-hour time frame.
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2024-09-21 16:12