Barclays analysts have issued a cautionary note regarding the current state of the cryptocurrency market, suggesting signs of a potential “bubble” after cryptocurrency prices surged to the point the space’s total market capitalization is now at $3.2 trillion.
The initial surge in cryptocurrency prices, particularly Bitcoin which moved to a near $100,000 all-time high before correcting, was largely attributed to the “Trump trade,” a market phenomenon characterized by expectations of favorable policy changes under the previous administration.
However, as the initial euphoria surrounding the former President’s election wanes, analysts at Barclays expressed concerns about the potential for a market correction. The note highlights a spillover effect, where the enthusiasm for cryptocurrencies has extended to other sectors of the equity market, particularly those favored by retail investors.
A Trump victory was widely expected to help boost Bitcoin’s price, as the former U.S. President has expressed strong support for the cryptocurrency sector, meaning the regulatory outlook could improve through the reduction of regulatory ambiguity and the appointment of more crypto-friendly officials to key positions, for example.
Bitcoin’s price, however, has been known to rally after U.S. presidential elections, having seen 90-day returns of 87%, 44%, and 145% after the elections in 2012, 2016, and 2020, respectively.
Bitcoin is up more than 140% over the past year as it moved to a new all-time high near the $100,000 mark after Trump won the US presidential elections, but has since corrected to now trade slightly above the $93,000 level.
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