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- Crypto momentum has slowed amid a lack of pro-crypto policy announcements from President Trump.
- According to Standard Chartered, a lack of fresh updates could spark a 10%-20% market correction.
- Investors should buy the dip, and lean into altcoins that will benefit from new ETFs and specific regulatory changes.
The longer President Donald Trump takes to unveil crypto-specific policy, the higher the risk investors are confronted with a painful sell-off.
Before inauguration day, crypto surged on bullish hopes that the new president would enact supportive changes within days. As Trump entered the White House on Monday, bitcoin jumped to a record high of $109,000, as investors cheered and eagerly awaited fresh pro-crypto policy decrees.
The hype didn't last, though. Bitcoin and other cryptos have been trending lower since January 20. The top token was down another 2% on Wednesday to trade around $104,172
According to Standard Chartered, the sagging momentum and the potential for a deeper correction reflect mounting disappointment in the lack of new policy announcements. The pain will also intensify if the administration doesn't offer a new catalyst that can jumpstart fresh gains soon.
"Hope is not a strategy. It can last days, not weeks," Geoff Kendrick, global head of digital assets research, said on Wednesday. "When hope dies, digital asset prices will fall 10-20%."
Investors had a lot to look forward to as Trump was sworn in on Monday. There was hope for an executive order making crypto a national priority, and excitement for a strategic bitcoin reserve.
Absent any update, the odds of a strategic reserve being created within Trump's first 100 days have fallen from 48% on Monday to 31% on Wednesday on the betting site Polymarket.
Meanwhile, some in the crypto industry expressed frustration with the president's recently issued $TRUMP meme coin, with some seeing it as a danger to the industry's credibility. Meme coins are highly volatile and trade purely on sentiment.
Kendrick expects the administration to eventually fulfill its crypto promises, but if that doesn't happen soon, the ensuing correction could last weeks or months. More headwinds could come if Trump pursues tighter tariffs on US trade partners. Protectionist trade policy could boost US inflation, hurting digital assets, he wrote.
Risk remains that bitcoin could fall below $90,000, a key threshold that Kendrick has previously cautioned investors to keep an eye on. However, with bitcoin nearly 14% above that price on Wednesday, a drop to that level would require a major unwind of long positions, he said.
However far digital assets fall, Kendrick ultimately sees a correction as a chance to buy the dip. And though he thinks bitcoin is still likely to hit $200,000 by the end of the year, investors might also want to pay attention to other tokens in 2025.
After Trump's election, Standard Chartered predicted the total crytpo market cap to expand four-fold by 2026, while bitcoin's share of the market would decline from around 60% to nearly 40%.
Both trends already appear to be taking shape, which could make 2025 a particularly strong year for altcoins. While institutional crypto will continue to reign, Kendrick suggested that investors lean into tokens that benefit from new ETF approvals, such as litecoin, or those that rise from specific regulatory changes, such as Uniswap.
Despite the bank's thesis, some in crypto feel like what little the administration has done on crypto is already helping. On Tuesday, the Securities and Exchange Commission announced a new crypto task force, which insiders see as a gateway to updated regulation and more crypto fund approvals.
"The newly established crypto task force, led by Commissioner Hester Peirce, could accelerate the approval of a broader range of crypto ETFs, including SOL, XRP, LTC, DOT, and DOGE," wrote Matt Mena, crypto research strategist at 21Shares.
According to Joel Kruger, LMAX Group market strategist, investors should treat this as a signal that the president is following up on campagin promises.
"Technically speaking, bitcoin is doing a good job consolidating following another push to a fresh record high this week. As per our chart analysis, the stage is now set for the next major upside extension towards $130,000," he wrote on Wednesay.
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