Author: Andrew Singer Translated by: Block unicorn

Many in the Bit cryptocurrency community believed that the re-election of US President Donald Trump would drive a surge in the price of Bit, and that is indeed what happened - the price of Bit rose from $69,374 on Election Day (November 5) to a historic high of $108,786 on the day of the new government's inauguration on January 20.

But since then, the price of BTC has mostly declined, even dipping below $80,000 on February 28 - a drop of 26%.

The new administration took office promising to establish a strategic Bit reserve, appoint Bit-friendly cabinet members, and push through market structure reform legislation. So far, it has largely delivered on those promises.

But it may still be too early to ask this question: has the "Trump effect" - the expected rise in Bit prices after the election of America's first pro-Bit president - been overhyped?

Perhaps macroeconomic factors, such as the looming trade war and global economic weakness, are behind the market price decline. Additionally, the $14 billion hack of Bybit, the world's second-largest Bit exchange, in late February has shaken confidence. Or could the chaos and instability created by the Trump administration itself in its first six weeks in office also be to blame?

Bloomberg noted on February 25 that "macroeconomic factors and Bit blowups have combined to undermine confidence." Meanwhile, the Financial Times observed that while some investors hoped Trump's election would herald a "golden age" for Bit, others, like the prominent US hedge fund Elliott Management, warned that Trump's embrace of Bit could lead to an "inevitable crash" that "could cause serious damage in ways we can't yet foresee."

"Healthy Correction"?

Independent Bit analyst Garrick Hileman told us: "While the recent Bybit incident has had a major impact, the shift in Bit price momentum began before the record $14 billion hack."

Hileman said the correction is indeed following the traditional market cycle - the "classic" "buy the rumor, sell the news" case - and further noted:

"The biggest Bit gains came around Trump's election, so the market cooling is expected, and may even be a healthy correction."

Additionally, Bit is now more closely tied to traditional markets, making Bit prices more sensitive to macroeconomic issues like inflation, interest rates, and trade tensions. Hileman pointed out that "these broader economic pressures are broadly suppressing risk appetite."

Justin d'Anethan, head of sales at token issuance advisory firm Liquifi, also believes the market is just experiencing a traditional "buy the rumor, sell the news" scenario.

Enthusiasm for potential pro-Bit policies from the new administration drove prices to record highs, but as the policy timeline became uncertain, enthusiasm turned to pessimism. d'Anethan told us: "With no immediate regulatory changes, the market has corrected."

And with the Bybit hack (blamed by the FBI on North Korea), "investor confidence has been severely shaken," he continued. Additionally, the subsequent money laundering/liquidation of the stolen assets "has put very real downward pressure on the market," despite Strategy (formerly MicroStrategy) acquiring large amounts of Bit, d'Anethan added.

Trend Still Positive

Nevertheless, James McKay, founder and head of digital asset advisory firm McKayResearch, told us: "The long-term outlook remains optimistic. We've never had a bull market cycle without multiple 30%, 40%, even 50% corrections."

McKay said: "The positive regulatory progress we've made in the past year outweighs the total of the previous four years," including the SEC's January 23 repeal of SAB 121, "which will allow mainstream financial institutions to custody Bit."

However, Hileman pointed out that while the optimism remains high, some uncertainty around Trump policies may still be lurking:

"Key initiatives - like an official 'Bit council' or a national Bit reserve - actually materializing remain in question."

For example, there were reports on March 2 that the Bit reserve plan still requires Congressional approval.

Hileman believes: "If Trump's promises stall or fail to materialize as expected, sentiment will further weaken."

"Impacts Still Emerging"

Perhaps the Bit industry was too optimistic after the US November election?

Hileman doesn't think so. He added: "The positive impact of Trump's election on the Bit market is real, but its impacts are still emerging."

Specific and meaningful events include pro-Bit cabinet and agency appointments, such as the SEC's Paul Atkins, Commerce's Howard Lutnick, and "Bit czar" David Sacks. Additionally, Coinbase and Uniswap no longer face regulatory roadblocks, as investigations into those Bit exchanges have been dropped.

But Hileman believes the long-term impact of the Trump administration remains unclear. "Recent events, like the Argentine president unexpectedly shilling a MEME coin, highlight the risks of political figures getting involved in Bit," he said.

Meanwhile, the Trump family, through their "personal" Bit plans, "could make similar mistakes that provoke strong backlash in the Bit space," Hileman added.

How to Restore Market Price Growth

So what steps can the government take in the coming months to help Bit and other Bits regain market price growth?

McKay said: "Continued progress on regulatory guidance, especially in lowering the barriers for TradFi participation, may be the most optimistic development." He believes the market has not yet fully priced in the repeal of SAB 121 - another potential catalyst for a quick price rise.

McKay added that other long-term drivers that haven't received much attention in the recent news cycle but are crucial for future adoption and market price growth include strong ongoing demand for Bit ETFs, increased corporate and sovereign adoption, and the "gradual emergence of the post-halving supply shock."

Additionally, the temporary dips in the prices of BTC, ETH, and other Bits may not be a bad thing. They could represent buying opportunities. Trader d'Anethan said: "If Bit prices are now 20%-25% cheaper, and large institutions or even retail investors aren't salivating at the prospect, that would be shocking."

Hileman expects the new government to fulfill its commitment to establish a cryptocurrency reserve within the US government, which will undoubtedly provide momentum for the industry, although the industry is further deviating from the decentralized cypherpunk origins of cryptocurrencies.