Market Reacts To Trump’s Crypto Support: Almost $10 Billion Invested In US Bitcoin ETFs

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As a seasoned researcher with over two decades of experience in the financial markets, I must admit that the recent surge in Bitcoin ETF investments and the subsequent rally in cryptocurrencies has piqued my interest. The parallels between this current trend and the dot-com bubble of the late 90s are striking, albeit with a more solid fundamental backing this time around.

As an analyst, over the past month since Donald Trump was declared President-elect, I’ve observed a significant influx of approximately $10 billion into U.S. spot Bitcoin Exchange Traded Funds (ETFs). This surge suggests a growing optimism among investors that Trump’s administration may be inclined to foster the cryptocurrency industry.

Since November 5th, about a dozen investment funds from major companies such as BlackRock and Fidelity Investments have collectively received approximately $9.9 billion in new investments for their Bitcoin Exchange-Traded Funds (ETFs). This influx of money has boosted the total assets held by these funds to roughly $113 billion.

Trump’s Appointments Signal Shift To Pro-Crypto Regulation

Trump’s latest choices, like designating a strong advocate for digital assets to head the U.S. Securities and Exchange Commission (SEC) and establishing a chief advisor for artificial intelligence and cryptocurrency at the White House, suggest a move towards a more accommodating regulatory environment.

Significantly, Trump has voiced his approval for creating a countrywide Bitcoin deposit, an idea that’s garnering cross-party endorsement within Congress, with Senator Cynthia Lummis being a key advocate for digital currencies.

For the very first time, Bitcoin crossed the $100,000 threshold on December 5 and was trading approximately $96,898 by Monday. This impressive six-week run is its longest stretch of gains since the market’s frenzy in 2021. However, analysts are still wary due to the cryptocurrency’s volatility.

David Lawant, who leads research at top crypto broker FalconX, pointed out that for Bitcoin (BTC) to consistently surpass the $100,000 mark, it’s likely additional favorable factors will be required. So far, BTC has found it challenging to reclaim this level and maintain stability following a recent four-day advance.

Bitcoin Rally Boosts MicroStrategy And Peers

Additionally, Bloomberg highlights that the optimistic sentiment towards cryptocurrencies has led to a significant recovery among businesses adopting MicroStrategy’s approach of using convertible bond sales for buying Bitcoins.

This year, MicroStrategy has been the sole company to sell a staggering $6.2 billion worth of convertibles, with plans to secure an additional $21 billion through bond offerings. Meanwhile, other firms like MARA Holdings and Core Scientific have managed to procure substantial funds for their Bitcoin investments.

Over the period since Donald Trump’s presidency, MicroStrategy’s stock (MSTR) has experienced a significant jump of 73%. Meanwhile, the stocks of Riot Platforms (MARA), Riot Blockchain, and Core Scientific have also seen substantial growth, with MARA increasing by 63%, Core Scientific rising by 33%, and Core Scientific’s shares growing by 30% respectively.

In essence, this development shares striking similarities with Bitcoin’s approximately 40% surge in value over the same timeframe. With a rapidly growing market capitalization nearing the $2 trillion mark, Bitcoin’s recent surge has significantly boosted MicroStrategy’s assets, now valued at over $41 billion.

In simpler terms, it’s noteworthy that the conditions of current cryptocurrency-linked convertible agreements are unique, as a significant number of them have been designed without regular interest payments (zero coupons). This setup enables investors to profit from a strategy known as “convertible arbitrage.

Even though a significant number of people are eager for these devices, there’s not much worry among them regarding potential drops in Bitcoin prices. Raj Imteaz, head of convertible and equity derivatives advisory at ICR Capital LLC, pointed out that major market players feel pressured to release convertibles to stay ahead in the competition.

If your rival possesses a substantial amount of funds with low interest rates (coupons) and you haven’t yet borrowed from the market, you find yourself in a less favorable position in terms of competition, he explained. Essentially, it may be necessary for you to issue convertible securities to remain competitive within the cryptocurrency sector.

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2024-12-10 11:10