Trump’s Election Victory Isn’t the Real Story Behind Bitcoin’s Rally

Analysts like Jesse Mayers believe the key drivers behind Bitcoin’s price pump include Bitcoin's post-halving scarcity and increased demand from ETFs, which resulted in a supply imbalance. Myers and James Check are sure that Bitcoin's unique supply dynamics are setting up conditions for a potentially extended price cycle. On the other hand, Ki Young Ju from CryptoQuant warned that an overheated futures market could cause a correction before the end of the year. Meanwhile, more businesses are seeing the potential of Bitcoin. China's Nano Labs started accepting Bitcoin as payment which caused its share prices to jump after a very turbulent year.

Bitcoin’s Latest Rally Isn’t Just About Trump’s Win

Bitcoin’s (BTC) recent price rally is attracting a lot of attention, and many believe the surge is due to the favorable political climate in the United States after Donald Trump’s election victory. However, some analysts argue that the real driver is Bitcoin’s post-halving supply shock.

Jesse Myers, co-founder of Onramp Bitcoin, shared his thoughts about BTC’s price success on X, and pointed out that while a Bitcoin-friendly administration provided a catalyst, the key factor is the aftermath of Bitcoin’s April halving. This halving reduced block rewards from 6.25 BTC to 3.125 BTC, which created a scarcity that intensifies over time as each block becomes harder to mine for a smaller reward.

According to Myers, the post-halving scarcity resulted in an insufficient supply to meet the current demand, which ultimately suggests that supply and demand pressures are pushing prices up. Additionally, Bitcoin exchange-traded funds (ETFs) also amplified demand significantly. 

On Nov. 11 alone, U.S. Bitcoin ETFs saw inflows of around 13,940 BTC, while only 450 BTC were mined. This imbalance, according to Myers, necessitates a price increase to restore equilibrium. This is likely fueling a cycle of price surges that could culminate in another bubble. He acknowledged that the notion of a predictable post-halving bubble may sound implausible but still argued that Bitcoin’s unique supply structure makes this cycle almost inevitable. Similar patterns were seen after the halvings in 2012, 2016, and 2020 as well, and Myers expects prices to rise even higher this time.

Onchain analyst James Check supported this view, and compared Bitcoin’s market cap with that of gold. Gold added about $6 trillion to its market cap in the past year, and sees a steady influx of new and recycled supply. In contrast, Bitcoin’s market cap stands close to $1.6 trillion, and with its absolute scarcity and loyal holders, he believes Bitcoin is poised to climb even higher.

Adding to the positive sentiment, American financier Anthony Scaramucci shared on Nov. 12 that even those who feel they missed the initial Bitcoin rally haven’t. He predicted that the U.S. will soon establish a strategic Bitcoin reserve, which will then encourage other nations and institutional asset managers to follow suit. With 94% of all Bitcoin already mined or lost, only about 1.2 million BTC is still available for future mining. This also adds even more pressure on supply. 

Crypto Investments Surge

Cryptocurrency investors also continued to show very strong interest in digital investment products over the past week, and many people believe this was fueled by post-election market momentum. From Nov. 3 to Nov. 9, crypto investment products recorded $1.98 billion in inflows. This period was the fifth consecutive week of inflows that totaled $7.7 billion.

Weekly crypto asset flows (Source: CoinShares)

Bitcoin ETFs in the United States were a primary driver of these inflows, with Bitcoin products alone contributing $1.8 billion. Since the U.S. Federal Reserve's decision to cut interest rates for the first time in four years in September, BTC products have attracted about $9 billion in inflows. CoinShares’ research director, James Butterfill, believes that this trend is very likely influenced by a combination of favorable macroeconomic conditions and large political changes in the United States.

Most of the inflows came from the United States, totaling $1.95 billion, while Europe contributed more modestly. Switzerland and Germany recorded inflows of $23 million and $20 million, respectively. However, Swedish investors remained cautious, with outflows reaching $25.7 million.

Flows by asset (Source: CoinShares)

Ether ETFs also experienced a surge in demand, and recorded their largest inflow week since their launch. Ether ETFs recorded inflows of $157 million during the first week of November, which could certainly be an indication of improving sentiment for Ethereum-focused investments. 

Bitcoin Could End Year Under $59K

Not everyone is as optimistic about BTC’s prospects before the year ends. Bitcoin may close the year below $59,000, according to CryptoQuant CEO Ki Young Ju, who points to an overheated futures market as a primary factor for a potential year-end correction. 

In a post on X, Young Ju shared his forecast of $58,974 for Bitcoin’s closing price. He believes that while Bitcoin's futures market indicators have been overheating, the asset is now entering a period of intensified price discovery. He suggested that while a correction and consolidation phase could help extend the bull run, an aggressive rally toward year-end might set up the market for a potential downturn in 2025.

Bitcoin’s open interest measures the total number of active positions in derivatives like futures and options. This metric for Bitcoin reached a record high of almost $50 billion, according to CoinGlass data. While some analysts agree with Youn Ju's more cautionary outlook, others are still optimistic. 

Ben Simpson, the CEO of Collective Shift, shared that a drop to $58,000 by year’s end is “very unlikely.” He specifically referred to factors like the recent U.S. election outcome, lower interest rates, and potential quantitative easing, which he believes are boosting investor sentiment. Simpson also pointed out that the growing daily Bitcoin ETF volume is evidence of increasing mainstream interest in the cryptocurrency. 

China’s Nano Labs Accepts Bitcoin as Payment

Meanwhile, shares in China-based crypto mining chip designer Nano Labs saw a slight increase after the company announced it will accept Bitcoin as payment for goods and services through a business account on Coinbase. In a Nov. 11 statement, the Nasdaq-listed firm shared that it is committed to “embracing the latest in financial technology.” The company did not specify if it would hold Bitcoin on its balance sheet.

The announcement triggered a 2.17% rise in Nano Labs’ share price to $3.29, though this recent uptick did little to offset its 60% drop over the last month from a high of $8.33. The stock is also still well below its all-time high of $96.20 that was set in July of 2022 shortly after its Nasdaq listing.

Nano Labs stock price (Source: Google Finance)

An increasing number of companies globally are now adopting crypto as a payment option. Tech giant Microsoft allows Xbox users to pay with Bitcoin, McDonald's accepts crypto in El Salvador and Lugano, Switzerland, and the NBA’s Dallas Mavericks allow fans to pay with Bitcoin for tickets and products through BitPay.

However, China’s relationship with crypto has been quite complex. While Beijing imposed strict regulations on crypto activities in 2021, including shutting down mining firms, there are some signs of a more relaxed stance recently. In September, a Shanghai Intermediate People’s Court acknowledged Bitcoin as a unique digital asset with inherent value. Hong Kong has also shown a more progressive stance towards crypto, and its Securities and Futures Commission (SEC) even approved the first spot Bitcoin and Ether ETFs in April.