Trump's Resilience Accelerates Crypto Bull Market

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The crypto market began the summer following the old investor adage, “sell in May and go away,” kicking off the typical summer doldrums. However, this changed dramatically over the past weekend with an attempted assassination on former President Trump. Despite being hit by a sniper's bullet during his speech, Trump quickly stood up with Secret Service assistance, raised his fist, and showed the crowd that he was okay, demonstrating resolve and bravery. This genuine display during a terrifying moment, immortalized in an iconic photo, may have made the future outcome of the election more predictable.

General sentiment suggests Trump is now a clear favorite to win the presidency in November, as displayed by the crypto market's immediate price action following the news. Trump has publicly declared his support for cryptocurrencies, exemplified by his campaign's acceptance of cryptocurrency donations. His running mate, JD Vance, shares a similar stance, openly advocating for digital assets and personally having an investment in Bitcoin.

One of the unique features of digital asset markets is that, unlike traditional capital markets, crypto trades 24/7. This allows investors to see market-moving events get priced in real-time. Within minutes of this weekend’s news breaking, on a Saturday night when most markets around the world were closed, the CoinDesk 20 Index gapped higher by 2%, after more than six hours of sideways trading within a tight 50 basis point range.

The market quickly and efficiently began pricing in a pro-crypto administration, making it no surprise that the crypto market rallied in the immediate aftermath. In the days since, the CoinDesk 20 Index is up nearly 10%, reversing a month-long downward trend.

As more traditional investors start to focus on the digital asset class, it is important to note that there is a confluence of fundamental events pointing towards higher prices in the months to come. Yesterday, the SEC informed ETH ETF issuers that they can begin trading on July 23rd. Similar to Bitcoin ETFs, which have seen total net inflows of approximately $55 billion so far this year, the ETH ETFs should attract new capital that has never been allocated to the crypto asset class before, a clear bullish indicator for the overall market.

The halving of newly mined Bitcoin in April sharply reduced miner profitability expectations, leading to a temporary decline in the network's hash rate. However, the hash rate has begun to recover as global Bitcoin mining companies acquire new miners set for deployment in the coming months. This increase in mining activity is expected to bolster the hash rate, enhancing the protocol's security and resilience. As a result, this influx of new mining infrastructure could positively impact Bitcoin's price by stabilizing network operations and boosting market confidence.

Finally, the market is beginning to price in a rate cut by the Federal Reserve later this year. A dovish Fed is bullish for risk assets, which includes cryptocurrencies.

The recent market low on July 5th may have signaled the bottom of the current cycle for this secular bull market. Should the next US president prove favorable towards digital assets, it may finally herald a new era of clear regulatory guidelines and widespread adoption of this transformative technology. This convergence of market indicators and regulatory sentiment could provide a foundation for sustained growth and stability in the digital asset space, setting the stage for broader investor confidence and innovation in financial markets.

The CoinDesk 20 Index is available through Hashnote.