Interview with Ausbiz: Crypto Market Predictions in Light of Upcoming US Election

Read more in a recent interview with Jon de Wet, CIO of Zerocap, on auzbiz TV.

30 August, 2024: The crypto market has been nothing short of volatile recently, a state of affairs that isn’t unfamiliar to seasoned investors. However, several developments are shaping the landscape, from the anticipated US rate cuts to the unfolding political scene leading up to the 2024 elections. Jonathan de Wet, CIO at Zerocap, offers insights into these events, their implications for major cryptocurrencies like Bitcoin and Ethereum, and the broader market.

US Rate Cuts: A Positive Signal for Crypto?

As the US Federal Reserve gears up for an anticipated rate cut, the crypto market is poised to react. Jon emphasizes that rate cuts are generally supportive of risk assets, including cryptocurrencies. Historically, such economic measures tend to encourage investment in high-risk, high-reward assets, as lower interest rates reduce the appeal of traditional savings and bonds.

However, this cycle differs from previous ones, especially in the way various segments of the crypto market are responding. While Bitcoin and Ethereum, the leading cryptocurrencies, have shown resilience, the altcoin sector has lagged. “We’ve seen equities move on the back of rate cut expectations, but crypto has been more volatile,” Jonathan notes. He observes that Bitcoin and Ethereum have been subjected to significant fluctuations, while altcoins haven’t moved as much as expected.

The broader market environment also plays a role, particularly the artificial intelligence (AI) sector, which has recently taken a hit. The intertwined nature of tech and crypto markets means that setbacks in one can impact the other. Jonathan suggests that as the Federal Reserve proceeds with rate cuts, Bitcoin’s potential will be more pronounced, especially as the US moves closer to the 2024 presidential election.

The Political Climate and Its Impact on Crypto

The upcoming US presidential election is another critical factor influencing the crypto market’s trajectory. As political narratives unfold, the stance of key candidates on cryptocurrency regulation will become increasingly important. Jonathan points out that while Donald Trump has historically been more laissez-faire regarding regulation—an approach that has generally favored cryptocurrencies—Kamala Harris, another potential candidate, has yet to clearly define her position on crypto.

“Trump’s presidency could be hugely positive for Bitcoin and Ethereum,” Jonathan suggests, citing Trump’s past comments and the possibility of a strategic reserve build involving Bitcoin. This potential policy would see the Federal Reserve and US government integrating Bitcoin into their treasury, a move that could significantly bolster the cryptocurrency’s value.

On the other hand, Kamala Harris’s approach remains uncertain. While she hasn’t cemented her policy on cryptocurrencies, Jonathan expects her to clarify her stance as the election draws nearer, particularly given the growing number of crypto holders in the US, many of whom could be swing voters. The current regulatory environment, largely shaped by SEC Chairman Gary Gensler, who was appointed by the Biden administration, has been seen as unfavorable towards crypto. Jonathan anticipates that Harris might address this as she solidifies her policy platform.

SEC’s Controversial Stance on NFTs

The Securities and Exchange Commission (SEC) has recently caused a stir in the crypto community by issuing a Wells notice to OpenSea, the largest NFT marketplace. The notice, which classifies artistic NFTs as securities, has been met with significant criticism. Jonathan de Wet is among those who view this move as an overreach by the SEC.

“Calling NFTs securities is akin to labeling comic books or traditional art as securities,” Jonathan argues. He believes that this classification is not only an exaggeration but also potentially harmful to the burgeoning NFT market. NFTs, or non-fungible tokens, have primarily been used to authenticate ownership of digital art and other unique digital assets. Despite the downturn in their popularity following the initial boom, NFTs remain a significant component of the crypto ecosystem.

Jonathan points out that the SEC’s move could be driven by the desire to regulate tax implications related to NFT transactions, particularly where NFTs have been used for tax loss harvesting. However, he cautions against blanket classifications that could stifle innovation. The crypto community is watching closely to see how OpenSea will respond to the SEC’s notice, as the outcome could set a precedent for the future of NFTs.

ETF Activity and the Movement of Altcoins

In recent weeks, there has been notable activity in exchange-traded funds (ETFs) and altcoins, indicating a dynamic market despite the broader economic uncertainties. Jonathan highlights that ETFs have been leading price movements in the crypto space, particularly in markets like Hong Kong, where Zerocap operates as a liquidity provider to the flows.

The altcoin market, though not as robust as the majors, has seen movement, especially in low-liquidity assets. Some investors are cautiously entering these markets, viewing them as opportunities to hedge risks before significant market shifts. However, Jonathan warns that this strategy is fraught with risks, particularly as tech markets, including AI, experience saturation and potential downturns.

Despite these challenges, Zerocap remains bullish on Bitcoin, positioning it as a safer bet compared to the more volatile altcoin market. Jonathan expects continued volatility leading up to the US elections in November, with Bitcoin likely benefiting from the uncertainty and potential shifts in policy.

The Future of Crypto: Resilience Amid Challenges

Despite the regulatory and market challenges, Jonathan de Wet, CIO at Zerocap, remains optimistic about the future of cryptocurrencies, particularly Bitcoin and Ethereum. He acknowledges the current headwinds, including the SEC’s aggressive stance and the saturation in tech markets, but he believes that the resilience of these digital assets will see them through.

The anticipated rate cuts, coupled with the political developments in the US, could create a favorable environment for Bitcoin in particular. Jonathan’s analysis suggests that while altcoins may continue to face difficulties, the major cryptocurrencies are well-positioned to capitalize on the evolving economic and political landscape.

In summary, while the crypto market is in a state of flux, Zerocap’s outlook remains positive, especially for Bitcoin. The coming months will be crucial, with significant events such as US rate cuts and the 2024 elections likely to shape the market’s direction. Investors should brace for volatility but also recognize the potential for substantial gains, particularly in Bitcoin.

Disclaimer

This article includes a summary of content originally published in Ausbiz. The information is intended for informational purposes only. Zerocap does not endorse or approve any specific content or viewpoints contained in the original articles.

Zerocap are not regulated by ASIC. Zerocap Pty Ltd is registered with AUSTRAC as a Digital Currency Exchange (DCE) service provider (DCE100635539-001) and is a Corporate Authorised Representative (CAR: 001289130) under an ASIC regulated licensee (AFSL 340799) to serve financial products and services.

www.zerocap.com