Monday, February 3, 2025

Crypto market reaction highlights sensitivity to political events, experts weigh in

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The cryptocurrency market witnessed a downturn, with Bitcoin and other major assets retreating as investor sentiment cooled following President Donald Trump’s inauguration.

Thangapandi Durai, CEO of Koinpark shared, “I believe the recent downturn in Bitcoin and other cryptocurrencies reflects a combination of market dynamics and unmet investor expectations following Trump’s inauguration. Before that, Bitcoin had reached impressive highs, fueled by optimism surrounding potential pro-crypto policies under the new administration.”

The inaugural address and initial executive actions did not address the digital asset sector, leading to a cooling of bullish sentiment, and prompting investors to reassess their positions. As a result, Bitcoin’s value dropped by 5.5 per cent, while other major cryptocurrencies like Ethereum and XRP also saw declines of 4 per cent and 5 per cent, respectively.

TRUMP — a recently launched token representing the US leader — experienced a significant 22 per cent decline within 24 hours. The token’s volatility underscores speculative trading behavior and the fragility of narrative-driven tokens in uncertain macroeconomic climates, observed Sathvik Vishwanath, CEO and Co-founder of Unocoin, adding that technically, Bitcoin’s price faced resistance at key levels, with reduced trading volume amplifying sell-offs.

Durai further explained that the introduction of meme coins like $TRUMP and $MELANIA added further volatility to the market. Despite their initial surges, these tokens experienced sharp declines — $TRUMP fell by 33 per cent, and $MELANIA plummeted 60 per cent. “This highlights the speculative nature of certain segments within the cryptocurrency market. The recent decline underscores the importance of approaching the cryptocurrency market with caution and informed strategies.”

However, Srinivas L, Founder & CEO, of 9Point Capital attributed these developments as indicative of the cryptocurrency market’s sensitivity to political events and the importance of clear regulatory frameworks.

“While short-term fluctuations are expected, the long-term value proposition of established digital assets like Bitcoin remains compelling. We advocate for a balanced investment approach, emphasizing due diligence and a focus on assets with strong fundamentals.” He added that the Trump coin, a meme coin launched recently, is a wrong comparison to Bitcoin, which is more of an established asset that has shown resilience and provided “stellar” returns over the last 14 years.

Sumit Gupta, co-founder, CoinDCX echoed this sentiment, saying that as an evolving asset class, crypto requires a balanced focus on both technical analysis and a deep understanding of its fundamentals before making decisions.

Policy progress

“On the policy front, progress takes time — both for governments and nations. However, there is clear global momentum toward creating more supportive frameworks for crypto, and the U.S. is expected to move in the same direction. While gradual, this process under Trump’s administration could take US crypto regulations to the next level, fostering greater clarity and trust in this transformative space.”

On the other hand, Mohammed Roshan Aslam, Co-founder & CEO of GoSats, is optimistic that Trump’s action at the Oval Office is key to Bitcoin’s growth.

“If his presidential campaign is an indicator, it will not matter much whether Trump’s inauguration had any announcements regarding policy reforms or announcements or not. Bitcoin’s robust growth in the last few months was primarily based on his promises of making America the Bitcoin capital of the world. If he aligns with his promises and begins delivering policy announcements, the market will continue a bullish outlook. Investors will do well to take a step back currently to assess the situation correctly before making any decisions.”







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