Bitcoin's dominance propels a significant surge for digital currencies this week.
Bitcoin's dominance propels a significant surge for digital currencies this week.
The crypto sector sprang to life towards the end of Tuesday, once it became evident that President Trump would emerge victorious in the election. While both candidates could have been beneficial for the crypto realm, leading to an uptick in crypto values this year, this result might have presented the most favorable scenario for regulatory modifications.
In terms of market capitalization, Bitcoin (BTC) (-2.26%) experienced the most significant surge, soaring by 11.3% within the past week, amounting to a $1.52 trillion market cap at 3 p.m. ET. Conversely, Ethereum (ETH) gained 18%, and Dogecoin (DOGE) recorded a notable increase of 22.6% during the same time frame, as reported by S&P Global Market Intelligence.
The election and the impending regulatory adjustments
The crypto community and innovators have faced challenges during the past four years due to the unpredictable regulatory landscape. Rather than offering concrete guidelines, both Congress and the United States Securities and Exchange Commission (SEC) have perpetuated ambiguity by leaving rules in a gray zone, choosing to enforce them only with legal actions following product launches.
This flimsy legislative framework has been the source of consternation among companies, which might see a shift under the new administration. The SEC chairman, Gary Gensler, is likely to be replaced shortly after President Trump's term commences, leading to an immediate modification of the enforcement environment.
Although it may take time for the rule changes to be implemented, it is anticipated that the incumbent Republicans controlling both Congress houses will help expedite the passage of favorable laws and political appointments for the crypto industry. The magnitude and nature of these regulatory developments remain uncertain, but without a degree of clarity, advancements in the industry may be stifled.
Investors bet heavily on crypto
The SEC sanctioned Bitcoin and Ethereum ETFs earlier this year, and within three days, following the election, Bitcoin ETFs saw inflows totaling $1.3 billion. These influxes contributed to the price increase, being a direct result of supply and demand dynamics.
Given that the regulatory climate may evolve, further ETFs could be introduced, potentially attracting even more investments.
Elon Musk and the Dogecoin surge
Dogecoin has seen speculation about Elon Musk's potential involvement in the project, which could translate into increased value for the token. While this remains highly improbable, it is the kind of conjecture that populates the market today.
Dogecoin was the foremost meme coin to witness significant growth, but it was not the sole one that recorded double-digit gains this week, with numerous smaller tokens also experiencing similar upward trends.
Forecasting the future of crypto
While the surge in values appears logical given the potential regulatory modifications, this upward trend does not guarantee sustainability. Many of the advancements in crypto over the past two years were not tied to tokens but were centered around the underlying blockchain and stablecoins. Even native tokens may not accrue value if stablecoins emerge as the dominant form of currency for transactions.
In my opinion, the future for blockchain technology is promising, but the companies developing blockchain solutions will be the primary beneficiaries. Speculating on tokens, like we saw in 2022, may not endure, as the frothy market brought about negative consequences for crypto investors.
Following the election result, there might be favorable regulatory modifications for the crypto industry, potentially attracting more investments in Bitcoin ETFs and other crypto-related products. (Investing, finance, money)
The uncertain regulatory landscape under the previous administration often left companies in a state of consternation, but the new administration could bring about changes that could expedite the passage of favorable laws and political appointments for the crypto industry. (Investing, finance, money)