TRUMP'S Frenzy Reinforces Expectations of a Trump Deal

Source: Coin Market Trader

In the past month, we have always believed that 88,000 is the bottom of this round of adjustment, mainly based on two reasons. First, since MSTR announced its $42 billion increase plan, 88,000 is the lowest average price in the seven purchases, which has become the key support for the continued operation of the MSTR bull flywheel. Secondly, among the Bitcoin ETF put options expiring on January 17, the proportion of put options below 88,000 has been less than 20%, indicating that the main bears have no intention to suppress the market. Therefore, we always believe that this round of adjustments is a short-selling trap for Trump to "reverse and pick up people" before he came to power, and this view has now been verified!

Although the market trading volume is still sluggish, driven by Trump's new encryption policy, the speculative enthusiasm in some parts of the market is still high. On January 18, the Meme coin TRUMP issued by the Trump family on Solana soared from US$0.18 to US$95, an increase of 52,700%, setting a myth of a 100-fold increase in 6 hours. According to on-chain data, about 476 addresses have gained 100 times the profit in the process of TRUMP's pull. An unknown whale address bought 5.97 million TRUMPs for US$1.1 million 90 seconds after TRUMP went online, with each costing only US$0.18, and the current floating profit exceeds US$400 million. With the popularity of TRUMP transactions, the DEX transaction volume on the SOL chain has increased sharply, and the SOL chain, which is known for its high performance, has also been congested, and the price of SOL has risen accordingly.

From the perspective of transactions, Trump's new crypto policy has actually brought two positive signals: First, the funds with the highest risk preference in the market are still actively looking for new trading main lines, and currencies with strong narrative logic can still obtain extremely high valuation premiums. Second, the US president's personal participation may greatly reduce the compliance threshold for personal coin issuance, and Trump's wealth-making effect will also set off a trend of celebrity coin issuance, which will bring new increments to the market. As David Sacks, the White House crypto director, said, the unfriendly rule against cryptocurrencies has ended, and the new era of US cryptocurrency innovation has just begun. Therefore, for a long time, no matter how the market fluctuates, the market will not lack trading opportunities. At the same time, under the guidance of TRUMP's powerful money-making effect, Trump-related themes have become the most certain trading direction in the short term.

At present, there are three clear directions for Trump's trading main line: one is the combination of tokens held by the WLFI protocol initiated by the Trump family, including ETH, AAVE, LINK, ONDO and ENA; the second is the projects led by political allies who provide financial and resource support for Trump's campaign, such as DOGE and XRP; the third is the Meme coins issued by Trump and his family, including TRUMP and MELANIA. Among them, the first main line is more like the long-term layout of the Trump family, because it not only has a complete compliance basis, but also has a very considerable potential increase.

On January 19, the Trump family reduced its holdings of $46 million worth of TRUMP in the name of market making, and increased its holdings of $48 million in ETH through WLFI. Affected by the popularity of TRUMP, the subscription volume of WLFI has surged, and the first round of 20% of the token supply has been sold out. Due to strong market demand, the project party decided to issue an additional 5% of the token supply, which means that the sales scale of WLFI on January 19 has exceeded three times that of the past three months. As long as the Trump family continues to implement the strategy of exchanging "air coins" for value coins, it is only a matter of time before the WLFI token portfolio rises.

However, under the stock market pattern, the activeness of Trump's main line also means siphoning the liquidity of the market. From January 19th to 20th, with the surge in TRUMP and MELANIA, old altcoins and AI Meme crashed one after another, and the tight liquidity situation in the market was undoubtedly revealed. According to past experience, the increase in trading congestion is usually accompanied by an increase in stock positions. Once market sentiment peaks and there is a lack of new incremental funds entering the market, the market tends to fall off a cliff. Therefore, when the Trump theme ebbs, the market may experience violent shocks.

In the macro sense, since December 1, 2024, the yield of US Treasury bonds has continued to rise and exceeded the federal funds rate, which has caused great concern in the market. According to past experience, the continued upward trend of risk-free interest rates often has a significant crowding-out effect on the liquidity of risky assets, which is also the main reason for the recent continuous sharp declines in altcoins and small-cap US stocks. However, as the momentum of rising inflation in the United States eased in December, the U.S. Treasury yields fell from high levels, and altcoins also rebounded strongly, causing the market's expectations for the "Altcoin Season" to rise sharply. It is worth noting that although the 10-year U.S. Treasury yield has weakened its constraints on risky assets, its yield is still at a high level in the past five years, and its inhibitory effect on speculative sentiment is still obvious.

If the 10-year U.S. Treasury yield cannot return to below 4.3% again (the level when the Trump deal was launched), it will be difficult for altcoins to see a large-scale market. Therefore, the current operating strategy of altcoins is still to focus on trading opportunities. In addition, as the U.S. Treasury yield rose from 3.67% to 4.76%, the size of global M2 also fell from 108T to 104.5T. Historically, the fluctuation direction of Bitcoin and global M2 is roughly the same. If M2 cannot stop falling and stabilize, Bitcoin will also be under further pressure.

In the stock market, funds always break out in the direction of least resistance, and following the trend is the best strategy to avoid making mistakes. Therefore, in the current market conditions, investors have no better choice than to participate in the Trump theme game. For investors with low risk appetite, following the WLFI portfolio is also a good idea. As for whether other altcoins have a chance to catch up, it will depend on whether there is room for improvement in macro liquidity.