FameEX Hot Topics | Trump's Inauguration May Signal a Slower Pace for Cryptocurrency Growth

Historically, markets tend to show strong performance after U.S. presidential elections, but this momentum often fades once the President-elect takes office. This pattern has been observed in both stock and cryptocurrency markets, with bullish trends typically stalling after inauguration. As President-elect Donald Trump prepares for his inauguration on January 20, 2025, analysts suggest a similar slowdown may affect the cryptocurrency market.

In the weeks following U.S. presidential elections, both stocks and cryptocurrencies like Bitcoin often experience positive performance. However, this initial enthusiasm typically wanes once the President-elect assumes office. Data from Bloomberg and Macrobond Financial highlight this trend, which has been consistent across multiple election years. The trend is especially pronounced when the incumbent president is from the Republican Party, as their business-friendly policies tend to generate greater post-election market optimism.

Research from TS Lombard indicates that post-election rallies are generally more significant when the president-elect is a Republican, yet they tend to fade once the president takes office. Citi’s U.S. equity strategist Scott Chronert suggests that investors may want to temper expectations if the S&P 500 surpasses its year-end target of 6,100, representing a 5% gain from election day. As of December 2, the S&P 500 stood at 6,047, reflecting a nearly 4.5% gain since November 5.

While some analysts anticipate Bitcoin’s rally will continue after Trump’s inauguration, concerns about a slowdown persist. Historically, Bitcoin has been closely linked to U.S. equities, particularly the Nasdaq. However, this correlation has weakened recently, dropping to 0.46 since March 2024, its lowest level in five years.

Despite this weakening correlation, Bitcoin remains exposed to broader market downturns, given its 50% correlation with U.S. stocks. Ethereum (ETH), with a higher correlation of 0.66 with the Nasdaq, could face similar challenges if the broader market experiences a downturn post-inauguration.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.