Trump's Pro-Crypto Stance Boosts Market

In the wake of Donald Trump's victory, cryptocurrencies have surged with Bitcoin at record highs near $90,000 and other tokens and crypto-related stocks in hot pursuit. Is this crypto bull market just getting started or is a market correction in order until the new administration takes office?

A Boost from an Influential Backer

Cryptocurrencies surged after Donald Trump's election, as the Republican candidate had previously expressed positive views. His vice-presidential pick, J.D. Vance, also shared similar sentiments.

The close association with Elon Musk is particularly interesting in the alternative currency market. Dogecoin, Elon's favourite altcoin, is rising even faster than Bitcoin (which set a new all-time high above $89,000), partially due to its association with the often-named Department of Government Efficiency (DOGE). Investors in Coinbase (and other exchanges) are equally enthused by the increases in their stock prices.

For Coinbase, this is a significant turnaround. The share price suffered its worst loss in two years, falling 15% in a single day after its earnings significantly disappointed at the end of October. The bulk of the losses were due to declining prices in cryptocurrency holdings, although the company's revenue from trading had nearly doubled since the prior year.

Now COIN stock is up almost 70% in less than a week since the election, as investors expect a surge in cryptocurrency trading and a corresponding increase in the value of the company's holdings, providing a double boost.​

To the Moon Next, or to Mars?

Recent reports indicate that $2.8 billion has been invested in future markets, betting that Bitcoin's price will surpass $90,000. This has fueled speculation about the cryptocurrency potentially reaching six figures, a psychologically important milestone. However, analysts caution that the recent surge increases the risk of a profit-taking correction in the short term.

Analysts remain optimistic over the long term, calling for investment in cryptocurrencies, whether directly in Bitcoin or crypto-related stocks like Coinbase. They cite the potential for an improved regulatory environment, as the incoming administration has expressed a pro-crypto stance and plans to appoint a crypto-friendly SEC Chair. Around $1.63 billion has flowed into Bitcoin ETFs following the election, capitalising on the typical seasonal trend where cryptocurrencies tend to outperform towards the end of the year. Some analysts are now discussing $200,000 as a potential target in the near future.

However, while the pro-crypto stance has boosted the market, higher interest rates are also expected under Trump, which could make sustained progress more challenging. It is important to note that there are still more than two months before the new administration takes office and likely even longer until it begins implementing regulatory changes - if indeed it does. Therefore, caution is urged as speculators may be overly enthusiastic in the wake of the election.​

Does COIN Have More Room to Run?

Coinbase ended a wedge pattern around the $150 level, indicating potential for an upward move towards $355 based on the measured-move projection. However, this target remains shy of the peak of $370 reached in late 2021. A double-top formation anywhere between the two could lead to a pullback.

If COIN breaks higher, however, the focus may shift to the $400 psychological resistance. On the downside, the $300 level serves as a major support area, with additional support zones at $270 and $210, derived from the wedge pattern peaks.​

Source: SpreadEx / Coinbase

Key Takeaways

In the aftermath of Donald Trump's election victory, cryptocurrencies surged, driven by his pro-crypto stance and the expected appointment of a crypto-friendly SEC Chair. Bitcoin reached a new all-time high above $89,000, while altcoins like Dogecoin also rallied.

Coinbase also soared nearly 70% as investors expected increased cryptocurrency trading and a favourable regulatory environment. Yet, analysts cautioned about the potential for a short-term profit-taking correction amidst the euphoria. While optimistic about the long-term prospects, they highlighted the challenge posed by expected higher interest rates under the new administration.