Crypto is back in full swing, with multiple digital assets breaking to highs not seen in months, while bellwether asset Bitcoin continues to set new records.
The industry’s total market capitalization is fast approaching the $3 trillion mark, previously established during the height of the last significant bull run on November 9, 2021.
But are the first signs of bubbling market froth sustainable?
Bolstered by several tailwinds, including President-elect Donald Trump’s victory, solid corporate earnings among broader equities, and heightened consumer sentiment, market momentum appears strong, according to some.
“We believe this rally is just getting started,” Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital, told Decrypt. “Since the election uncertainty was removed last week, we have hit a new all-time high every day, and for good reason.”
Trump’s “red sweep” last week, which included a majority win for Republicans in the Senate, has added to optimism the former president’s party will meet little resistance in passing legislation favoring the industry.
Along the campaign trail, Trump made several promises to crypto advocates, including establishing a Bitcoin reserve, protecting U.S. interests for miners, fostering favorable policy, and establishing a crypto council to oversee their implementation.
“We are currently in a seasonal sweet spot for crypto, and the ongoing post-election rally is expected to extend into January,” Real Vision Chief Crypto Analyst Jamie Coutts told Decrypt. “The investment timeframe is crucial—over the next nine to 12 months, the crypto market is poised for significant growth.”
Whether or not heady prices can be sustained through to next year largely depends on several outlying factors, according to Jehan Chu, co-founder and managing partner at Hong Kong venture capital firm Kenetic.
“While this rally is just kicking off and should run past inauguration, every past cycle has taught us that all good things must come to an end,” Chu told Decrypt.
He pointed to geopolitical risks in the Middle East and Eastern Europe, ballooning U.S. debt, and possible climate disasters as potential catalysts for ruining the party.
“Barring any major catastrophes, I expect the market’s sugar high to run out of steam in Q1 with a moderate correction followed by more sugar,” he added.
McMillin, like Real Vision’s Coutts, agrees, forecasting at least a one-year window in which crypto prices could run higher.
“A $100,000 price tag by year-end is very much in play,” McMillin added. “We expect record ETF inflows to continue, FTX cash distributions to recycle straight back into the market, and a friendly, or at least even-handed Securities and Exchange Commission.”
For Coutts, risks emerge if the MOVE Index, which signals bond market volatility, rises above 130, the 10-year U.S. Treasury yield surpasses 4.5%, or the DXY exceeds 105.5, reflecting a stronger dollar.
Currently, the MOVE Index is at 98.85, the 10-year Treasury yield is at 4.31%, while the DXY is approaching its critical level at 104.95.
That could deter crypto investments if those markers are breached, Coutts said.
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