The crypto market's fate hangs in the balance as the 'Trump Fed Takeover' looms. But will this controversial move be a game-changer for crypto?
Some traders believe the market underestimates the potential impact of this takeover on global liquidity, and by extension, the crypto space. Macro analyst plur daddy (@plur_daddy) shares a bold prediction: the Trump Fed takeover is his primary focus for 2026, especially for gold. He argues that the more significant and impactful the catalyst, the harder it is for markets to accurately price it in.
This sentiment is echoed by Joseph Wang, a former Fed trader, who warns of the market's underestimation of a Trump Fed. He suggests that the administration's push for lower rates could trigger a massive rally in equities, indicating that speculation has room to grow.
The market's tension is evident in the bond market, where the term premium is pushing back. Plur points to the spread between the 12-month T-bill and the 10-year Treasury as a clear indicator. This spread initially peaked before the inauguration due to expectations of a 'hot' Trump economy, but then plummeted as DOGE and Tariffs were priced in. It has since rebounded, signaling a form of protest against Trump's potential Fed pick, Kevin Hassett.
The administration has tools to reduce term premium without resorting to quantitative easing. Plur outlines three strategies: deregulating banks to increase Treasury holdings, reducing the Treasury's weighted-average maturity by shifting to bills, and leveraging GSEs to buy MBS, thus easing mortgage spreads. These moves, he argues, are bullish for risk but will take time to unfold.
Currently, the market is challenging for directional risk bets, including crypto. Equity indices have risen, but rotations are complex. While QT has ended, liquidity remains thin, and the year-end timing adds complexity.
Looking ahead, plur anticipates a bullish shift in 2026, driven by fiscal expansion and potential Fed actions. This could alleviate liquidity issues in funding markets, though it's not traditional QE. Bank reserves, currently tight due to repo liquidity issues, would expand.
For Bitcoin and crypto, plur's outlook is cautious. He predicts a choppy period of re-accumulation for BTC, despite improved liquidity. The question remains: will fresh demand in the crypto market be sufficient to counter the inelastic supply?
And here's the twist: The Trump Fed trade is already fueling high-risk bets in gold, equities, and commodities. Crypto may benefit indirectly, but the real challenge is whether it can attract enough new demand to match the crypto market's rigid supply.
Controversial Take: Is the crypto market's fate solely in the hands of the Trump Fed Takeover? Or are there other factors at play that could influence its rise or fall? Share your thoughts in the comments below!
