FameEX Hot Topics | Trump's Inauguration Could Signal a Slowdown in Cryptocurrency Growth

Historically, markets tend to perform well following U.S. presidential elections but often stall once the President-elect takes office. This trend has been observed across both stock and cryptocurrency markets, with data showing that bullish momentum tends to slow down after the inauguration. As President-elect Donald Trump’s inauguration approaches on January 20, 2025, analysts predict a similar pattern may occur in the cryptocurrency market.

In the weeks following U.S. presidential elections, stocks and cryptocurrencies like Bitcoin typically see positive performance. However, as the President-elect assumes office, the initial market enthusiasm often fades, according to data from Bloomberg and Macrobond Financial. This trend has been observed across several election years, especially when the incumbent president is a Republican, whose business-friendly policies tend to trigger market euphoria.

Research from TS Lombard reveals that post-election market rallies are more pronounced when the president-elect is from the Republican Party. These rallies often fade once the new president officially takes office, signaling a shift in market sentiment. Scott Chronert, a U.S. equity strategist at Citi, suggests that investors should consider fading the post-election rally if the S&P 500 exceeds its year-end target of 6,100, 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.

Despite concerns about a slowdown, some analysts believe Bitcoin’s rally will continue post-inauguration. Historically, Bitcoin has been seen as a high-risk asset closely tied to U.S. equities, especially the Nasdaq. However, this correlation has weakened in recent months, dropping to 0.46 since March 2024, one of its lowest levels in five years.

Even with a weakened correlation, Bitcoin remains vulnerable to broader market downturns, as it still holds a nearly 50% correlation with U.S. stocks. Ethereum (ETH) shows an even higher correlation of 0.66 with the Nasdaq. As a result, both Bitcoin and Ethereum could face challenges if the broader market experiences a downturn post-inauguration.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.