Expert Macro Commentary
Feb 19, 2025 | Steven McClurg, CEO
Markets typically rise in times of certainty. The old adage that “Bulls and Bears make money, pigs get slaughtered” is true. If you have a read on the political and economic environment, regardless of positive or negative news, there is a way to make money.
Crypto rallied after the assassination attempt on Trump over the summer. This was largely due to increased certainty around who would win the election, as the event moved the election odds in Trump’s favor. Crypto rallied again after Trump won the election.
To be clear, crypto would have rallied regardless of who won the election. If Harris had won, investors would have positioned their portfolios accordingly: Bitcoin, Ethereum, and Litecoin – all assets that Gensler stated were not securities – would have thrived under a Harris administration, while other crypto assets would likely have underperformed. Under Trump, a pro-crypto President, everything has rallied, even more so than under Harris. Markets were simply waiting for results to see which direction to go and to determine how big the gains. Indeed, Bitcoin has hit all time highs in November, then December, then again after the inauguration on January 20th. But Bitcoin is down 10% since then, and other major cryptocurrencies are down 20%. Why?
In Trump’s first 30 days in office, we have seen a lot of promises fulfilled: everything from tariffs, to spending cuts via DOGE, to mass government layoffs and buyouts. In the long run, these actions may be good for the health of the country, the government, and for business. In the short run, there is the pain of decrease in government spending, higher unemployment, and uncertain responses around tariffs. Though these actions were promised during the campaign, they have come as a surprise to markets. No one anticipated that a politician would actually make good on campaign promises, not to mention so quickly.
The unexpected swiftness of executive actions has created chaos in markets, because we don’t know what will happen next. When tariffs were first introduced, the markets plummeted. When tariffs were levied a second time, in even greater size, markets rallied. Why? Because now we know to expect tariffs. When Trump secured massive investment for US-based AI, markets celebrated. When DeepSeek was noticed, markets tanked. Investors worried – Do we even need that much investment? Has China won? What is DeepSeek anyway? But as investors digested the news, markets recovered.
So why are crypto markets not rallying now that all of this is behind us? There are still 70 days left in Trump’s first 100 days. Investors know one thing for certain: Trump wants to make a big splash in his first 100 days, so anything can happen. We have two or three more months of market chaos (volatility) until institutional money can enter without fear of headline risk.
Why then, is there a disconnect between crypto markets and traditional markets in this environment? The S&P is trending just fine, recovering to pre-election levels, while crypto markets suffer. The quick answer is lingering policy uncertainty around crypto. Even though many of Trump’s appointees who are pro-crypto have taken on roles in the administration (Howard Lutnick, Scott Bessent, Hester Peirce, David Sacks), there are currently task forces in various parts of government who are evaluating the vastness of crypto, and trying to create a suitable framework for investors. This will not happen overnight. The SEC, the CFTC, Congress, Treasury Department, Fed, and Banking all have their ideas. There have also been many discussions on a Strategic Bitcoin Reserve (SBR), a crypto council, and other initiatives. So far, these have not come together, and there is doubt they ever will.
Until there is certainty in a regulatory framework, or SBR and an established crypto council, investors won’t know the final account, nor can reasonable investment decisions be made in the sector. Based on the slow pace of government change, even under a fast-moving President, there will likely not be clarity on crypto until June/July of this year. However, April will probably bring a strong lean in market direction.
Until then, we will live in a chaotic market. Crypto will underperform the S&P and BTC will be volatile within a range of $85k and $110k. Spring will usher in more certainty and new all-time highs, but in times of uncertainty, stop trading, build long-term positions, grab some popcorn, and enjoy the show.
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