Key Takeaways
- The crypto community is calling for clearer policy direction from Vice President Kamala Harris, despite recent positive remarks, according to Bernstein analysts.
- Analysts suggest that a Trump victory would likely strengthen crypto market sentiment, given his clear pro-crypto stance and policy proposals.
With Bitcoin up by 10% and Ethereum gaining 17% over the past week, crypto market sentiment is gaining attention. Analysts at Bernstein have identified several key factors fueling the rally and the role upcoming political developments could play in shaping the digital asset landscape.
Harris and Crypto Community Seeking More Certainty
During a recent fundraiser on Wall Street, Vice President Kamala Harris expressed her support for the cryptocurrency industry, vowing to promote innovation while protecting consumers. This was Harris’ first clear mention of digital assets, a move recognized by Bernstein analysts Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia. However, they noted that Harris’ position contrasts with Donald Trump’s more assertive approach toward crypto.
Trump has positioned himself as a strong supporter of digital assets, promising a crypto-friendly SEC chair, policies backing Bitcoin mining in the U.S., and stablecoin regulations. While Harris’ comments offered a sense of relief to some in the crypto community, many remain cautious, seeking more detailed policy commitments.
Given the Biden administration’s previous actions, including Senator Elizabeth Warren’s “anti-crypto army” rhetoric and the SEC’s ongoing lawsuits against major crypto firms, the industry remains wary. For Harris to gain more crypto backing, clearer regulatory frameworks and stronger follow-through will be needed.
Stronger Crypto Sentiment Expected if Trump Wins
Analysts at Bernstein believe that a Trump win in the 2024 presidential election would likely improve crypto market sentiment. Trump’s proposed policies suggest a new regulatory environment that could support not only Bitcoin but also DeFi, asset tokenization, and NFTs. This shift would be significant for the broader crypto ecosystem.
According to data from the decentralized prediction platform Polymarket, Harris is currently leading Trump 52% to 47%. However, national polling averages show a much tighter race, with Harris at 48% and Trump at 46%, according to Bernstein.
ETF Flows and Evolving Monetary Policy
Regardless of the election outcome, institutional interest in crypto remains robust, with newly launched Bitcoin and Ethereum ETFs driving market momentum. Last week alone, the spot Bitcoin ETF market saw net inflows of $397.2 million, bringing the total to $17.7 billion. In contrast, Ethereum ETFs saw net outflows of $608 million, although new ETFs attracted $2.2 billion, partly offsetting the $2.8 billion in outflows from Grayscale’s incumbent fund, ETHE.
Bernstein expects more traditional financial institutions, such as Morgan Stanley, to continue introducing crypto investment products, which could drive renewed interest and inflows into digital assets.
Another significant factor is the U.S. Federal Reserve’s recent 50-basis-point interest rate cut. The rate cut, along with rising U.S. fiscal debt, positions Bitcoin as a hedge against monetary inflation and fiscal instability, much like gold. With the U.S. debt nearing $35 trillion, Bitcoin’s appeal as a non-sovereign asset continues to grow.
Bitcoin Miners Stabilizing After the Halving
The recovery of the Bitcoin mining sector and the completion of large-scale Bitcoin selling are also boosting market sentiment. Following April’s fourth halving event, inefficient miners have been forced out, while overall network hash power has rebounded to pre-halving levels, indicating renewed stability.
Additionally, concerns over major Bitcoin selling are diminishing. Both the U.S. and German governments have finished offloading significant Bitcoin holdings, while the market has absorbed $8 billion in Mt. Gox distributions. Meanwhile, companies like MicroStrategy continue to raise capital to acquire more Bitcoin, with over $2 billion invested in recent weeks.
Conclusion
As the 2024 election looms, the crypto community is closely watching for more concrete policy actions from Vice President Harris, while many view a Trump victory as more favorable for the industry’s regulatory environment. Regardless of the political outcome, institutional interest, evolving monetary policy, and a stabilizing mining sector suggest that the crypto rally may continue to gain momentum. However, the dynamic nature of the market means that both political and economic factors will play crucial roles in shaping the future of digital assets.
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