Bitcoin's price has experienced a significant resurgence, nearing the $100,000 mark, fueled by a combination of factors including Donald Trump's evolving stance on cryptocurrency and a shift in Federal Reserve policies. This rally has not only brought back notable gains of months past, it’s reportedly revitalized the entire cryptocurrency market. A leaked report outlining Donald Trump's radical plans for crypto is generating both excitement and apprehension within the financial establishment.
Now Jerome Powell’s Federal Reserve is taking actions to reverse Biden-era crypto regulations. Some industry critics even referred to these rules as “Operation Choke Point 2.0.” In turn, banks have begun fleeing from the crypto sector.
Michael Saylor, one of the most influential bitcoin advocates, welcomed the new landscape.
"Banks are now free to begin supporting bitcoin," - Michael Saylor
The Federal Reserve's recent statement, welcomed by Saylor, signals a more accommodating approach to crypto-related activities within the banking sector. Much of the Bitcoin world has focused on this policy change as the primary spark of the current run-up of Bitcoin’s price.
Next, in their announcement, the Board of Governors of the Federal Reserve announced that they are officially rescinding the 2022 supervisory letter.
"The Board is rescinding its 2022 supervisory letter establishing an expectation that state member banks provide advance notification of planned or current crypto-asset activities," - The Board of Governors of the Federal Reserve
Tagus Capital analysts think that the rollback of restrictions strengthens the hand of the member banks of the states. Now, they can easily go into crypto experiments without advance approval. They stressed that all of these activities would continue to be supervised under normal practice.
"With these restrictions now lifted state member banks can pursue crypto ventures without prior approval though such activities will still be monitored through standard supervision," - Analysts with Tagus Capital
These analysts further cite the Trump administration’s growing, positive opinion of crypto.
"This move reflects the Trump administration’s increasingly pro-crypto stance including reduced regulatory enforcement, support for a national bitcoin reserve and the appointment of a Securities and Exchange Commission (SEC) chair, Paul Atkins, known for backing digital assets.” - Analysts with Tagus Capital
Bitcoin ETFs have mirrored this newfound market enthusiasm too, notching their best day since January. ETF issuance is absolutely booming at the moment. This increase comes just as the U.S. and China seem to be making moves to cool the global trade war.
These are developments which Joel Kruger, Market Strategist at LMAX Group, is watching closely. He especially wants to stress the need for strong US administration policies and Federal Reserve actions.
"Looking ahead, markets will closely monitor US administration policies and Federal Reserve actions," - Joel Kruger
Kruger further points out that the market is highly attuned to sensitive decisions by the Fed on interest rates and general economic expectations.
"Despite signs of the president softening his trade stance, uncertainty persists about the U.S. economy’s trajectory. Pressure is mounting on the Fed to cut rates more aggressively, which could trigger broader U.S. dollar outflows.” - Joel Kruger
The market has been eagerly anticipating a shift in the Fed’s interest rate policy. Investors internalizing the risk of recession and the possibility of return of quantitative easing.
In the meantime, Bitcoin ETFs have shaken off their recent downward trend. Speculators are now approaching a “risk on” mentality after news emerged that the U.S. and China are seeking avenues to de-escalate the global trade war.
