A recent report from asset manager and cryptocurrency exchange-traded fund (ETF) issuer VanEck, led by Matthew Sigel and Nathan Frankovitz, examines bitcoin fundamentals, adoption trends, and emerging volatility in the wake of Federal Reserve interest rate cuts and the upcoming U.S. presidential election.
Shift in bitcoin Adoption
He bitcoin-chaincheck-1-year-review-edition/#impact-of-election” target=”_blank” rel=”noopener nofollow”>report It highlights that the price of bitcoin has increased by 124% over the past year, significantly outperforming almost all major asset classes. Within the cryptocurrency sector, bitcoin’s dominance, as measured by its market capitalization relative to the total cryptocurrency market, has increased by 15% year-on-year, reaching 56%.
Despite the firm's strong price performance, he notes that the dynamics driving bitcoin adoption have changed. In 2023, bitcoin saw a 155% surge, purportedly driven by “sign-ups,” which allow users to store media files on the network. Blockchain and attract retail liquidity and trading fees.
However, the firm believes that this trend has faded, leading to a 93% decline in daily sign-up transactions. Consequently, the decline in on-chain activity has led to a drop in daily active addresses and transaction fees, suggesting that bitcoin’s current price appreciation is due more to its role as a store of value than retail transactions.
This shift suggests that institutional players are increasingly using bitcoin to store and transfer value. Coinciding with this trend, bitcoin-related cryptocurrencies actions have seen an 87% increase in market capitalization, reflecting the growing adoption of bitcoin as an investment vehicle.
Fed rate cuts and Harris and Trump's divergent paths
Looking ahead, VanEck claims that the interplay between the Federal Reserve’s monetary policy and the political landscape will profoundly affect btc and the broader market. digital asset market.
Suppose the Federal Reserve continues to lower interest rates in response to economic challenges. In that case, the firm anticipates that this could create a favorable environment for risk assets like btc, attracting investors looking for higher returns.
The next United States presidential election It also paints a complex picture of bitcoin’s future. Both possible administrations, that of current Vice President Kamala Harris or former President Donald Trump, are expected to maintain or even accelerate fiscal spending, which could result in further quantitative easing.
This monetary policy, intended to stimulate the economy, may inadvertently create a favorable environment for risk assets like bitcoin. However, the impact could undermine investor confidence if either administration adopts anti-business policies.
Ought Kamala Harris If Gary Gensler decides to keep his position as chairman of the Securities and Exchange Commission (SEC) or align himself closely with the Elizabeth Warren wing of the Democratic Party, the asset manager predicts that the digital asset sector may face an increasingly strict regulatory framework.
Despite these potential challenges, the asset manager argues that a Harris presidency could benefit bitcoin in the long run. The reasoning is that a more regulated environment can bring greater clarity and legitimacy to the cryptocurrency space.
On the contrary, a potential Donald Trump The presidency will likely favor a more deregulated environment, which the firm believes could benefit the entire crypto ecosystem.
Regardless of who wins the presidency, the firm says that “the general trend” of escalation budget deficit and rising national debt Debt is likely to continue. These 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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