Bitrabo Editorial
A new study from VanEck, a prominent asset manager and crypto ETF provider, conducted by Matthew Sigel and Nathan Frankovitz, explores Bitcoin’s fundamental aspects, adoption patterns, and rising volatility following the Federal Reserve’s interest rate reductions and the upcoming US presidential election.
Change in Bitcoin Adoption Trends
The study indicates that Bitcoin’s value has increased by 124% over the last year, significantly outperforming most major asset classes. Bitcoin’s market dominance, which reflects its market cap compared to the entire cryptocurrency market, has grown by 15% in the past year, now standing at 56%.
Despite this robust performance, the report highlights a shift in the factors influencing Bitcoin’s adoption. In 2023, Bitcoin’s value soared by 155%, largely due to “inscriptions” that enabled users to upload media files onto the blockchain, which in turn attracted retail interest and generated trading fees. However, this trend has diminished, resulting in a striking 93% drop in daily inscription transactions. This decline has led to fewer active addresses and transaction fees, implying that Bitcoin’s price increase is more about its function as a value store rather than retail usage.
This changing landscape points to an increasing reliance on Bitcoin by institutional investors for value storage and transfer. Alongside this, Bitcoin-associated stocks saw an 87% rise in market capitalization, highlighting its growing role as an investment option.
Impact of Federal Reserve’s Rate Cuts and Political Landscape
VanEck also posits that future interactions between the Federal Reserve’s policy decisions and the political environment will significantly affect both Bitcoin and the wider digital asset landscape.
If the Federal Reserve continues to lower interest rates in light of economic pressures, the firm suggests this might create a more attractive environment for risk assets like Bitcoin, drawing in investors looking for higher returns.
The forthcoming US presidential election adds complexity to Bitcoin’s trajectory. The potential leadership of either Vice President Kamala Harris or former President Donald Trump is likely to continue or increase fiscal spending, potentially leading to further quantitative easing.
This monetary approach, although intended to stimulate the economy, could foster a thriving market for risk assets such as Bitcoin. Yet, investor confidence might be adversely affected if either leader pursues anti-business strategies.
In the event that Kamala Harris retains Gary Gensler as SEC Chair or aligns with the Elizabeth Warren faction of the Democratic Party, the company foresees a possibly stricter regulatory environment for digital assets.
Despite these potential obstacles, VanEck argues that a Harris administration might ultimately benefit Bitcoin by providing greater regulatory clarity and legitimacy to the cryptocurrency market.
On the flip side, a potential Trump presidency may lead to a less regulated atmosphere, which could be advantageous for the crypto sector as a whole.
No matter the electoral outcome, VanEck believes that “the broader trend” of increasing budget deficits and national debt is likely to persist. Such economic conditions often weaken the US dollar, creating a favorable macroeconomic climate for Bitcoin, which has thrived historically in similar situations.
Currently, Bitcoin is priced at $62,700, reflecting a nearly 3% decrease over the last 24 hours.
Image courtesy of DALL-E, chart sourced from TradingView.com