Bitcoin Frenzy Cools as Powell Speech Counters Trump Promises

The speculative frenzy around Bitcoin since Donald Trump's US election victory is moderating both in the spot and derivatives markets.

Bitcoin’s speculative surge is moderating after a relentless rally that saw the world’s largest cryptocurrency soar about 30% since the US election on Nov. 5 in response to President-elect Trump’s pro-crypto stance.

The digital asset slid below $87,000 at one point on Friday after Federal Reserve Chair Jerome Powell said there was no need to rush interest-rate cuts. Bitcoin later pared some of its losses, trading at $90,265 as of 12:11 p.m. in London.

In the derivatives sector, the premium paid for CME-listed Bitcoin futures over the spot market price has declined, according to K33 Research. The US-based institutional investors use the contracts to take positions on the original cryptocurrency.

Figures from Amberdata show a 24-hour surge in open interest — or outstanding contracts — for bearish options with a strike price of $80,000.

“Markets seems to be cooling down,” said Vetle Lunde, head of research at K33, adding that the narrowing of the futures premium “might have been a subtle hint of moderating risk profiles.”

Trump’s Pledges

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Bitcoin has jumped about 30% since the US election on Nov. 5 in response to President-elect Trump’s pro-crypto stance. The digital asset is now viewed as one of a suite of so-called Trump trades, and speculators are wondering how much impetus the rally has left.

Trump has promised to create a friendly regulatory framework for crypto, set up a strategic Bitcoin stockpile and make the US the global hub for the industry. A onetime crypto skeptic, Trump changed tack after digital-asset firms spent heavily during election campaigning to promote their interests. Questions remain about the feasibility and implementation timeline of his promises.

Investors poured a net $4.3 billion into US spot-Bitcoin exchange-traded funds after Election Day. The 12 funds, from issuers including BlackRock Inc. and Fidelity Investments, now have total assets of about $93 billion, based on figures compiled by Bloomberg.

Volatility Expected

“It’s all pure speculative trading right now,” said James Davies, chief executive officer at on-chain futures and options trading platform Crypto Valley Exchange. “Expect lots of volatility and a lack of clear signals for a while, whilst we wait for policy announcements in the US.”

Davies flagged $90,000 as a key marker to watch to see if acts as a “resistance level, or if we are well past it.” One of the highest concentrations of bullish Bitcoin options bets is for the $100,000 strike, data from Deribit show.

Bitcoin changed hands at $87,740 as of 6 a.m. Friday in London. Smaller tokens such as second-ranked Ether and meme-crowd favorite Dogecoin were mixed, in line with easing risk appetite as traders pared bets on Fed rate cuts following Powell’s comments.