January 24, 2025

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Trading Desk Insights

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Just days into Trump's second term, Wall Street has shifted its stance on crypto. Key CEOs from top financial firms have expressed a willingness to ramp up their involvement in digital assets, contingent on favorable policies from the administration. On Thursday, Trump issued a broad executive order aimed at "protecting and promoting" the growth of digital assets, which includes plans for establishing a national digital asset reserve. There's also growing optimism that the potential repeal or revision of SAB 121 could alleviate the current capital constraints, allowing banks to hold crypto assets with fewer burdens.

Despite these promising developments, markets show mixed signals. Polymarket's odds of Trump establishing a Bitcoin reserve within the first 100 days have dropped from 48% on January 20 to 19% by January 23.

Bitcoin continues to hold above the $100,000 mark, a significant psychological level, while the Nasdaq has faced recent pressure. Some coins are underperforming relative to the broader market, while others like TRX, KAS, SOL, LINK, and ETH are outperforming. TAO and APT have seen pullbacks to their 61.8% retracement levels, aligning with the previous highs from August 2024, which could suggest a potential entry point.

Equity futures were largely flat on Friday, following a record closing high for the index after President Trump’s remarks on lowering interest rates and crude prices.

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The News Room

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Trump, SEC Move to Legitimize Crypto 'Within the Realm of TradFi,' But Some Market Participants Remain Cautious

President Donald Trump’s administration has prioritized cryptocurrency by signing an executive order to establish a Presidential Working Group on Digital Asset Markets, tasked with developing a federal regulatory framework for digital assets and evaluating the creation of a strategic national digital assets stockpile. Concurrently, the SEC revoked the controversial Staff Accounting Bulletin 121 (SAB 121), which required crypto custodians to record customers' crypto holdings as liabilities, a move seen as a significant game-changer by the crypto industry. While leaders like MicroStrategy and Bitwise express optimism about legitimizing Bitcoin within traditional finance and fostering institutional adoption, some analysts remain cautious, emphasizing the need for more concrete actions such as the creation of a national Bitcoin reserve. The industry welcomes these regulatory shifts but calls for tangible commitments to fully realize the potential growth and stability of the crypto market under the new administration.

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BoJ’s Rate Hike Stabilizes Bitcoin and Stocks, Prevents Summer Meltdown

The Bank of Japan raised its benchmark interest rate to 0.5%, the highest level in 17 years, but markets reacted calmly, with Bitcoin holding steady above $106,000 and U.S. equities remaining near all-time highs. This subdued response contrasts sharply with the turmoil following the BoJ’s unexpected rate hike in July 2024, which triggered a global sell-off and significant declines in Bitcoin and stock markets. Analysts attribute the current stability to the rate hike being anticipated and priced into the markets, as well as the continued viability of yen carry trades due to the wide interest rate gap compared to other currencies. Additionally, positive sentiment from the Trump administration’s pro-crypto stance and favorable regulatory developments have bolstered institutional confidence. The BoJ’s gradual and well-communicated approach this time has helped mitigate market shocks, highlighting increased resilience and preparedness among traders compared to the previous rate hike event.

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MicroStrategy to Redeem $1.05 Billion in Convertible Notes Amid Crypto Tax Uncertainty

MicroStrategy is set to redeem $1.05 billion in 2027 convertible notes by exchanging them for its Class A common stock at a rate of 7.0234 shares per $1,000 principal, aiming to reduce debt and encourage equity conversion. The company, the largest corporate holder of Bitcoin with 461,000 BTC valued at approximately $48 billion, may face up to $18 billion in realized gains taxes under the 2022 Inflation Reduction Act despite not selling any tokens. However, IRS rule changes influenced by the Trump administration's pro-crypto agenda could exempt MicroStrategy from these taxes, similar to the exemption previously granted to Berkshire Hathaway. Tax analyst Robert Willen expects the IRS to rule in favor of MicroStrategy, highlighting that there is no significant accounting difference between crypto assets and stocks regarding unrealized gains tax exemptions.

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Crypto Charts

ETF Flow

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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