Crypto Market Eyes Trump’s Cabinet Picks as BTC Touches $90K—Scott Bessent in Focus
Digital Asset Market: Donald Trump's victory in the US presidential election and his plans to create a more lenient regulatory environment for cryptocurrency have significantly impacted global crypto markets. In South Korea, the trading volume on cryptocurrency exchanges has surpassed that of traditional stock exchanges. Trump's potential pick for Treasury Secretary, Scott Bessent, has an 88% chance of being selected and has expressed support for Bitcoin and cultivating a crypto-friendly market culture in the US. Trump's pro-crypto candidates for key regulatory positions, including the SEC, to carry out their mandate in transforming the US into a global crypto hub. However, cryptocurrency markets may be overheating, and some industry leaders warn of an upcoming deleveraging before the next leg up. Despite this caution, analysts expect Bitcoin to reach new highs, which will be influenced by Trump's victory and the expected improvements in macroeconomic conditions.
Recent buying activity in the Bitcoin market has primarily been driven by small addresses, or "shrimps," as they accumulate BTC despite price swings. This contradicts the belief that larger addresses, or "whales," are the smart money of the market, as they have been selling into price strength. This data challenges the traditional view of retail investors as less informed and highlights how they have evolved into savvy market participants over time.
Macro Economics: US President-elect Donald Trump is expected to name two strong critics of China, Senator Marco Rubio and Representative Mike Waltz, to his administration, which is a sign that the already tense relationship between the two superpowers could worsen in the coming years. This decision comes amid Trump's promise to impose a 60% tariff on Chinese products, which could severely impact trade between the two nations. Additionally, the nomination of Elise Stefanik, a vocal opponent of the Chinese Communist Party, as the US ambassador to the United Nations further adds to the uncertainty over the future of US-China relations. The presence of Elon Musk in Trump's inner circle could potentially provide a moderating influence, given Musk's business interests in China. His company makes half its electric vehicles in China. There is still a chance that Trump can change his mind about these appointments.
Equities: The US stock market saw a pause in its record-setting rally, with the Dow Jones Industrial Average falling about 0.4%, the S&P 500 and the Nasdaq Composite declining roughly 0.2%. The market is questioning whether the recent surge in stocks has been overdone and how the Cabinet picks of President-elect Donald Trump will impact policy. The 10-year Treasury yield also rose, signaling potential profit-taking. Additionally, the rally in Bitcoin slowed down, reaching a high of $86,340, and other "Trump trades," such as Tesla and Coinbase, struggled for gains. The focus is now shifting to critical economic data being released this week, notably Wednesday's Consumer Price Index for October and Thursday's retail sales data, which will provide insight into inflation and the Federal Reserve's decision at its December meeting.
The Fed and US Treasury: The Federal Reserve announced a 25-basis point cut in its benchmark interest rate last week, following a September cut of 50 basis points. This is in response to cooling inflation and a softening job market. The market expects another 25-basis point cut in December and a decrease to 3.5% by mid-2025. Concerns about President Trump's proposed global tariffs and harsher immigration policies have led to speculation about fewer interest rate cuts in the future, with markets now expecting a total of 1 percentage point in cuts in the first half of 2025. Former Fed policymaker Loretta Mester believes there will be fewer than four cuts next year but still sees potential for a cut in December. The impact of tariffs on the global economy and the possibility of reciprocating trade war has also caused concern among policymakers.
Geopolitical: The Organization of the Petroleum Exporting Countries (OPEC) saw a significant increase in crude oil production in October. Libya’s output returned to total capacity after a political impasse halted production in September. OPEC’s monthly report states that in October, the cartel’s total crude oil output reached 26.53 million barrels per day (bpd), a jump of 466,000 bpd from the previous month. Libya, Nigeria, and Congo primarily drove the increase, while Iran, Iraq, and Kuwait saw decreased production. Libya’s output surged by 556,000 bpd after resolving a political dispute that had halted more than half of its production.
Meanwhile, Iran’s output decreased by 68,000 bpd as the country awaited a potential attack from Israel, leading to a reduction in exports. However, Saudi Arabia, the top producer in OPEC, maintained its output at 9 million bpd as pledged. OPEC will reverse its production cuts in January 2025, assuming market conditions permit. The US benchmark WTI is trading at $68, compared to the high of $116 in May 2022, contributing positively to global inflation concerns.
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Bitcoin surged past $80K without resistance, briefly touching $90K overnight, largely driven by demand from Korean retail investors. The market is responding to signs that Trump may fulfill his campaign crypto promises, with attention now on his potential cabinet appointees. Among the frontrunners for Treasury Secretary is Scott Bessent, founder and CEO of Key Square Group, who currently has an 83% chance on Polymarket and 82% on Kalshi's prediction market. Bessent, a vocal supporter of cryptocurrencies, recently stated, “crypto is about freedom and the crypto economy is here to stay.”
The rally has been powered primarily by small investors and crypto enthusiasts driving prices higher, while larger holders, or whales, have taken profits and likely shorted the rally. Given these dynamics, a brief market pause is anticipated before any further upward movement. The heightened retail activity reflects optimism, though it also signals potential volatility as market sentiment shifts.
Traditional financial markets, meanwhile, have shifted their focus from election results to policy implications, fundamentals, and corporate earnings. Investors are particularly attentive to how President Trump's promises on tariffs and immigration will be implemented, as any major changes could negatively impact the global economy and drive inflation at home. Simplistic measures such as raising tariffs on China may not effectively bring jobs back and could have complex repercussions.
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