The Crypto Market Rallies as the Trump Presidency Begins, but Will the Good Times Last?

Crypto had a strong showing on Friday, the last day of trading for Wall Street markets before the Trump presidency begins on Monday. Of course, crypto is traded 24/7, but volume and liquidity often fall over the weekend, so traders are building their final positions before the new administration takes over.

Bitcoin (CRYPTO: BTC) has led the way, rising 5.6% in the past 24 hours as of 12:30 p.m. ET and nearly crossing $105,000 per token. Ethereum (CRYPTO: ETH) is up a more modest 2.6% in that time, and Dogecoin (CRYPTO: DOGE) is up 7.3%.

Will the crypto floodgates open on Day 1?

Reports are circulating in the media that President-elect Trump will sign an executive order making crypto a national priority on Day 1 of his term. It's not entirely clear what that means outside of replacing the current Securities and Exchange Commission chairman with a more crypto-friendly regulator.

Traders buying tokens may be surprised at both how slow policy will change in Washington, D.C., and where the changes will come from. Congress will likely need to act to make the rules of the industry more clear, but that doesn't mean meme coins and blockchain tokens will necessarily gain value. Instead, it means assets like stocks and bonds could trade on the blockchain and more innovations, like business formation, could take place on the blockchain rather than through expensive legal manners.

I think the policy changes will broadly benefit crypto, but the winners may not be the obvious tokens rising today.

When the rubber hits the road

In this period between the election and the inauguration, the market has speculated about everything from regulations to a crypto reserve in the U.S. Investors were buying the rumors. Now, it's time to pay attention to the news.

It will be much harder to gain momentum if the news doesn't live up to lofty expectations. The Federal Reserve can't make Bitcoin or any other cryptocurrency a reserve currency without an act of Congress, and that's unlikely to happen, given the slim majority holding the bodies together today.

Most of the inflows from exchange-traded funds hitting the market have also been priced in since they happened early in 2024.

The more likely outcome for crypto is some disappointment as the market starts to realize the next catalyst isn't around the corner. But for long-term investors, I think the growth in stablecoins for everything from currency exchanges to online payments is something to watch. That's the real utility the blockchain is built for; it just won't accrue value to most tokens.

Momentum and memes have driven the day

Today's move is driven by more speculation that President Trump will be good for the crypto market. But that kind of speculation has led investors astray before. In 2021, it was thought that inflation and high budget deficits would lead to big gains for Bitcoin and other cryptocurrencies, but the opposite took place. The market crashed in 2022 and has only recently recovered.

I think the blockchain has a bright future, but I'm not buying tokens on speculation at this peak. I think there will be better opportunities to buy the dip in the future.