WealthBee Macro Monthly Report: Welcome to Trump's Crypto Era
Trump has been elected as the new President of the United States, becoming the biggest political and economic topic in November. Unsurprisingly, the impact of Trump's presidency is enormous, with his "Trump 2.0" economic policy route differing from other parties and his strong support for cryptocurrencies reversing the previous trading logic in the market. Stock market liquidity began to flow into more sectors, and the frenzy in the crypto market is closely related to Trump, all of which seem to indicate that a new trading logic system is being born.
With the conclusion of the U.S. elections, Trump has been re-elected as President, becoming the 47th President of the United States. With the election results settled, the U.S. will return to a right-wing development approach, alleviating global traders' concerns about election risks.
As a traditional conservative, the Republican Party advocates for tax cuts, revitalizing manufacturing and traditional energy industries, reducing government regulatory power, and expelling illegal immigrants. The "Trump 2.0" approach further implements the "MAGA Party" policy concept.
From a policy perspective, Trump's approach is very similar to that of Reagan, both employing a combination of "expansive fiscal policy + deregulation + trade protectionism." Reagan used this approach to lead the U.S. out of the stagflation following the oil crisis, driving economic recovery and ultimately achieving the "Reagan economic cycle," which continued to influence subsequent U.S. economic policies. Whether Trump can replicate Reagan's "successful" path and pull the U.S. economy back from the brink of stagflation has become the most watched focus of his term.
The similarity between Trump's policies and Reagan's may become the main trading logic for the subsequent "Trump trade," which investors can continue to monitor.
Returning to the inflation data and Federal Reserve policies in November, on November 26, the Federal Reserve released the minutes from the Federal Open Market Committee (FOMC) meeting held on November 6-7. The minutes indicated a 25 basis point rate cut in November, in line with expectations. At the same time, the Federal Reserve emphasized that "participants expect that if the data aligns with expectations, inflation continues to decline to 2%, and the economy remains close to maximum employment levels, then gradually shifting to a more neutral policy stance over time may be appropriate." This "more neutral policy stance" means that the Federal Reserve will no longer deliberately pursue rate hikes or cuts but will adjust based on market economic conditions, which undoubtedly suggests that the Federal Reserve has an optimistic outlook for the U.S. economy to emerge from recession and recover in the future.
In November, the U.S. stock market operated smoothly, with small incremental breakthroughs to historical highs. In the AI sector, although Nvidia (NVDA) reported better-than-expected third-quarter earnings, it fell 5% in after-hours trading on the day of the earnings release due to not being "too much better than expected." Currently, the market's attitude towards AI seems to be "as long as it’s not too explosive, it’s underwhelming."
Since Trump's election, Bitcoin has surged like a wild horse, heading straight for $100,000. The market's FOMO sentiment was severe, only easing slightly in the last week of November. Against the backdrop of Trump calling for a "Bitcoin strategic reserve," Pennsylvania was the first to pass the "Bitcoin Rights Act," seemingly ushering in the "Trump era" for cryptocurrencies, which are becoming subjects of legislative protection in the traditional world, truly entering everyone's lives.
If Trump's election brought Bitcoin to new heights, Musk has completely ignited the MEME sector. With Musk joining the "Trump 2.0" government team, three Musk-related coins saw violent surges. The longer narrative behind this small episode is that Musk, as a leader in technological innovation, may accelerate the advancement of crypto technology, such as promoting the integration of AI and blockchain.
Thus, cryptocurrencies have rightfully replaced AI as the new darling of the stock market in November, and people are naturally seeking opportunities related to cryptocurrencies in the secondary U.S. stock market. Among the Bitcoin frenzy throughout November, the biggest winner that emerged was MicroStrategy (MSTR) — with its stock price increasing by over 140% in November.
Source: StockCharts.com
MicroStrategy initially started as a niche software company founded in the 1990s. After surviving the tech bubble of 2000, it entered a stable business phase but had little room for significant growth until its CEO Michael Saylor became a Bitcoin believer around 2020, incorporating Bitcoin as a core strategy into the company's balance sheet. He successfully constructed a "Bitcoin-driven" growth logic for the company: Bitcoin constitutes a significant portion of the company's assets, and its value fluctuations directly impact the company's value. As Bitcoin prices rise, MicroStrategy's stock price increases significantly due to asset appreciation, surpassing Nvidia in daily trading volume. Through leveraged capital operations, the company can issue new shares to raise money and continue buying Bitcoin. During November, MicroStrategy raised $4.6 billion through stock issuance, reinvesting all of it into Bitcoin, driving up Bitcoin prices and creating a cycle of buying Bitcoin - stock price increase - borrowing or issuing more shares to buy more Bitcoin, tightly linking shareholder interests with Bitcoin appreciation. The unexpected surge in MicroStrategy's stock price is essentially viewed by some investors as an indirect way to hold Bitcoin and they are willing to pay a premium for it.
Bitcoin has made MicroStrategy successful, and MicroStrategy has also contributed to Bitcoin's success. Its aggressive bond issuance and stock sales to buy Bitcoin, along with its high-profile market presence, have propelled Bitcoin's rise from $70,000 to $90,000, just as Bitcoin ETFs helped push Bitcoin from $40,000 to $70,000. Therefore, MicroStrategy is also considered the biggest driver of Bitcoin's rise from $70,000 to $90,000.
Some investors believe that MicroStrategy has cleverly discovered a method to exploit loopholes in the fiat currency system, fully utilizing the inefficiencies of traditional capital markets to gain leverage advantages against fiat currencies, and perfectly integrating this with Bitcoin's predictability, thus endowing itself with significant upside potential. In short, it is about using cheap and continuously expanding capital to acquire scarce and appreciating assets. Of course, this logic assumes that Bitcoin will inevitably succeed in the long term. As of the latest data, MicroStrategy currently holds 279,420 Bitcoins.
MicroStrategy's "digital gold standard" strategy and capital operation model provide us with a new experimental example. If market conditions continue to improve, this model may become an industry pioneer, guiding other companies to adopt similar strategies, accelerating the adoption of Bitcoin on corporate balance sheets, and promoting Bitcoin's recognition as a top-tier asset.
The market's rise has already led retail investors to sell Bitcoin in pursuit of the so-called high returns from meme coins. Currently, Bitcoin has become the main battlefield for whales. Some believe that the biggest risk to Bitcoin currently comes from whale sell-offs. As one of the largest whales, MicroStrategy's biggest sell-off risk lies in the forced liquidation of bonds due to falling Bitcoin prices, which could trigger a self-reinforcing decline in Bitcoin prices.
However, this argument overlooks MicroStrategy's bond structure. The bonds issued by MicroStrategy are convertible bonds, which belong to off-market leverage. Even if MicroStrategy cannot repay its debts three years later, creditors can only convert the debt into stock and sell it in the stock market, which cannot shake Bitcoin's price. Therefore, rather than worrying about MicroStrategy being forced to liquidate and sell Bitcoin to repay debts, it might be better to worry about those buying MicroStrategy stock in the U.S. stock market.
Investor Victor Dergunov has pointed out that while MicroStrategy has shown forward-thinking, its stock is clearly in an overbought state, which can be seen as a typical bubble in the entire crypto sector. Although Bitcoin is far from its peak, reality has already sounded the alarm, reminding us of what can happen when the market heats up too quickly. The market's valuation of MicroStrategy will reach a clearer consensus, and this valuation is likely to be significantly lower than the current level.
Of course, a more promising future is that we may see Bitcoin securing a place on the balance sheets of thousands of companies, with MicroStrategy being recorded in history as a financial pioneer.
In November, against the backdrop of Trump's election as President of the United States, the economy showed multidimensional changes. The FOMC meeting cut rates by 25 basis points, and December is likely to continue the easing, injecting liquidity expectations into the economy. Trump's economic team is being formed and is expected to replicate the previous high-growth economic path. The U.S. stock market continues to rise to new highs, and the crypto market is celebrating under Trump's favorable policies, with Bitcoin nearing $100,000. MicroStrategy has risen due to its Bitcoin holdings and has pioneered new capital operation experiments. Looking ahead, attention should be paid to the implementation strength and pace of Trump's policies, as well as the impact of rate cuts on the economic structure. If Trump's commitments to the crypto industry are partially realized, $100,000 may not be the endpoint for Bitcoin's price, but merely a milestone in its upward journey. The road is winding, but the future is bright.
