Trump Signs Executive Order for Crypto-assets

 The deal is done... or is it?

Throughout his career, Trump has been known for leveraging his position to negotiate deals that benefit his personal interests and those of his companies, whether through branding, real estate ventures, or business partnerships. He often seeks to position himself in ways that maximize personal or corporate gain, sometimes at the expense of broader policy goals or public perception.

For example, Trump’s real estate deals have often been structured to create tax advantages or favourable financing terms for his businesses, and his brand has been a central component of his wealth. Even during his presidency, he continued to hold business interests that he did not divest, leading to concerns about conflicts of interest and how his personal wealth could intertwine with policy decisions.

Given this track record, it is crucial to factor in the possibility that his interest in crypto might be influenced by both broader economic strategy and personal financial considerations.

Why the crypto policy shift?

Firstly, crypto investors, companies, and executives made significant contributions to Trump’s 2024 campaign. These financial support could be seen as a motivating factor behind his pivot toward pro-crypto policies. For Trump, these donations represent not just support for his political goals, but also an alignment with an industry that has shown potential for explosive growth. The crypto industry is inherently speculative and can be seen as a high-risk, high-reward area - exactly the kind of sector where Trump, with his business background, might see opportunities for personal and political gain. In other words, supporting crypto could be a way to align with wealthy donors, investors, and executives who stand to benefit from an environment that is more favourable to digital assets.

Then, the Trump’s promise to keep 100% of Bitcoin holdings acquired by the U.S. government further emphasizes this financial angle. Given his history of maximizing financial leverage, Trump could see these assets - whether seized or acquired through other means - as potential vehicles for both wealth accumulation and political leverage. Holding a national crypto stockpile could also serve as a way to ensure that the U.S. maintains influence over the global crypto market, an area where Trump might want to position himself as a key figure. If the U.S. government were to amass significant Bitcoin holdings, it could potentially benefit Trump’s network of allies or supporters in the crypto industry.

Many of the individuals appointed to leadership positions under Trump’s potential administration are aligned with pro-crypto ideologies or have close ties to financial sectors with strong crypto interests. Appointing figures such as Scott Bessent (a hedge fund manager with ties to the crypto industry) to lead the Treasury Department signals that Trump is looking to support the financial structures that benefit from cryptocurrency's rise. As Trump himself has seen the financial benefits of maintaining close ties to wealthy business leaders, it is possible that some of his crypto-friendly moves are designed to protect or enhance the interests of key business figures or entities connected to him or his broader political network.

Finally, Trump’s ventures - real estate, branding, and licensing deals - could also potentially benefit from the rise of cryptocurrency. The growing intersection of traditional finance and crypto means that Trump’s companies could eventually tap into blockchain technology, digital payment systems, or other innovations tied to the crypto sector. For example, real estate transactions using crypto could become more common, and Trump’s properties could become key players in this new financial ecosystem. By promoting favourable crypto policies, Trump might be positioning his businesses to capitalize on these trends.

Given Trump’s business history and potential financial entanglements, there is an obvious concern about conflicts of interest. If U.S. policy shifts in favour of crypto, benefiting companies or individuals with ties to Trump, there could be questions about whether his personal financial interests are unduly influencing public policy. 

The fact that crypto executives contributed heavily to his campaign could raise concerns about whether the policy shift is a direct result of those contributions. Critics might argue that the administration is aligning its policies to benefit donors and major players in the crypto space.

If Trump or companies associated with him have financial exposure to cryptocurrencies (either through direct investments or partnerships), there might be concerns that his policies could unfairly favour those assets, especially in light of his past efforts to position himself for personal financial benefit through public office.

By appointing figures like Paul Atkins, who has a history of opposing heavy regulation, Trump could be signalling that his administration is more likely to push for a "hands-off" approach to crypto regulation. While this may benefit the industry by fostering innovation, it could also benefit Trump’s financial interests if he has personal stakes in businesses that stand to gain from less regulatory oversight.

While the executive order reflects a broader strategic interest in fostering crypto innovation and securing U.S. leadership in the digital asset space, it is important to acknowledge the potential financial motivations driving these decisions. Trump’s history as a dealmaker who leverages his position to benefit personally means that the shift towards pro-crypto policies may not solely be motivated by ideological or economic factors related to national interest. It is possible that personal financial interests, donor support, and the potential for future wealth creation could be influencing his stance on crypto.

In this light, Trump’s pro-crypto policies may not just be about promoting the U.S. as a leader in blockchain innovation but also about creating an environment where his financial networks can continue to thrive. Given his track record, it would be prudent to critically assess whether these policies are more about advancing personal or political gain than about the broader economic benefits they claim to offer.

Major Catalysts for Crypto Surge

The recent surge in cryptocurrency prices can be attributed to several key factors that have collectively boosted market sentiment and investor confidence.

 

Political Developments: The election of Donald Trump as President-elect has significantly influenced the crypto market. His victory has sparked optimism about potential pro-crypto regulations in the U.S., including promises to establish a Bitcoin strategic reserve and reform the SEC's leadership, which many in the crypto community view as favourable for industry growth.

Increased ETF Inflows: There has been a notable resurgence in inflows into U.S.-based Bitcoin exchange-traded funds (ETFs). Following a period of outflows, these funds recorded significant net inflows, with Bitcoin ETFs experiencing over $600 million in inflows on election day alone. This influx indicates growing institutional interest and confidence in cryptocurrencies, contributing to rising prices.

Market Sentiment and Technical Factors: The overall market capitalization of cryptocurrencies has surged, reaching levels not seen in months. This rise is partly due to a technical rebound from previous lows, with Bitcoin breaking above significant resistance levels, signalling bullish momentum. Additionally, the crypto fear and greed index has shown "extreme greed," indicating heightened investor enthusiasm.

Macroeconomic Influences: Broader economic factors, such as expectations of potential interest rate cuts by the Federal Reserve, have also played a role. Lower interest rates typically enhance risk appetite among investors, making assets like cryptocurrencies more attractive compared to traditional safe havens.

Retail Adoption and Market Education: There is an increasing trend of retail adoption as more individuals become familiar with cryptocurrencies and their uses. Enhanced accessibility through user-friendly platforms and educational resources has contributed to this growth, further driving demand34.

The combination of favourable political developments, increased institutional investment through ETFs, positive market sentiment, macroeconomic factors, and rising retail adoption has created a robust environment for cryptocurrency prices to rise. As these trends continue to evolve, they may sustain the upward momentum observed in the market.

Singapore Exchange (SGX) vs. S&P 500

For Singaporean investors, the age-old question arises: where to park your capital? Two popular options are the local Singapore Exchange (SGX) and the behemoth S&P 500, representing the US market. Let's delve into their performance to guide your investment decisions.

Understanding the Titans

• SGX: The Singapore Exchange is a premier bourse in Southeast Asia, offering a diverse range of assets like stocks, bonds, derivatives, and Exchange-Traded Funds (ETFs).
• S&P 500: The S&P 500 tracks the performance of 500 leading companies listed on US stock exchanges, representing a significant chunk of the American economy.

Performance Check

Historically, the S&P 500 has been a strong performer, averaging around 10% annualized return. However, past performance doesn't guarantee future results.

Looking closer, you'll need to consider a specific timeframe. Here's a brief comparison:

• Short Term: Both markets can experience volatility. Recent events can significantly impact performance in either direction.
• Long Term: The S&P 500 has generally shown more consistent growth over extended periods.

Beyond Numbers

Performance isn't the sole factor. Here's what else to ponder:

• Diversification: SGX offers exposure to Southeast Asian markets, providing diversification beyond the US.
• Investment Style: The S&P 500 is a passive investment, mirroring the market's performance. SGX allows for picking specific stocks or ETFs that align with your investment goals.
• Currency Fluctuations: Since SGX trades in Singapore Dollars (SGD), currency fluctuations can impact returns for foreign investors in the S&P 500.

The Takeaway

There's no one-size-fits-all answer. Both SGX and S&P 500 offer distinct advantages. Consider your risk tolerance, investment horizon, and diversification needs before making a choice. Consulting a financial advisor can provide personalized insights for navigating your investment journey.

Panic Selling, Panic Buying

The worst thing one can do is to sabotage their own financial plans by engaging in the senseless behaviour of panic selling and panic buying. The recent financial turmoil arising from the subprime crisis in the US has unnerved many investors. Just months ago, many investors were still looking at increasing their investments for fear of missing out on the attractive returns that were being dangled by the various well performing stock markets.

Why is it that we find it so much easier to invest our money when markets have headed up significantly and find it so difficult to invest our money when markets are depressed and downside is limited?

Much research had gone into analysing such investor behaviours and it largely boils down to panic buying and panic selling.

When markets are on an uptrend, the good news abound and money appears to be readily available on the tables for anyone willing to reach out for it. Investors are afraid of losing out on pocketing the potential profits with each day's delay. Speculators rush into the markets in panic buying and all sorts of equities, blue chips or not, rise across the board. Yet, when stocks are chased to sky high valuations, not many see the warning signs that whatever goes up must come down, and continue to pour cash into these already risky investments, priming themselves for major losses once the market corrects the excesses.

When the market inbalances start to even out with corrections, people rush to liquidate their investments. Granted, this is sensible behaviour for the protection of the value of the assets will enable one to re-enter the market at a later date. The problem perhaps, is knowing when to re-enter the market. When is the best time to invest again?

Panic selling results in stock valuations falling below their reasonable valuables and once investors have confidence that the valuations are extremely compelling, it should be a good time to start investing in the market again. No one knows when exactly stock markets bottom and neither will anyone know how long bearish sentiments will prevail. However, one thing history has shown us - After a period of negative sentiments and stock prices had been depressed, it is only a matter of time before stocks rebound. As long as time is on the investors' side and free cash is not being earmarked for any use in the short term, it is better to bargain pick some fundamentally solid stocks and hold on to them.

In each investor's lifetime, it is expected that there will come various opportunities whereby the market is put up for sale at fantastic bargains. The major market crashes like US Sub-Prime Crisis in 2008, SARS in 2003, dot com bubble of 2000, Asian Financial Crisis in 1997, Black Monday in 1987, Wall Street Crash in 1929... all presented superb opportunities for the brave to go against the panic selling of the masses. Investors should be rational about investing in the stock market. When the upmarket departmental store launches an exceptional sale, people rush in to grab all sorts of merchandise. When the stock market falls to extremely depressed levels, people are avoiding the market instead of picking up good discounted shares that will bring much happiness once the financial storm blows over?

In the stock market, money is not made by following the crowd. Panic selling and panic buying is not going to help grow the investment portfolio spectacularly. Exceptional returns are only available to those who are able to see beyond the fears of the common investor. Who dares win.

Worries About Stocks Frenzy in China

China's Social Security fund, among the country's top investors, has wound down its positions in equities, highlighting concerns the nation's markets are overheated, the Financial Times said Friday.

Gao Xiqing, the fund's vice chairman said at banking conference in Beijing that he is worried about the 16-month run up in share prices in China's two bourses which forced the fund to cut stock holdings and reduce risk.

"This market seems to be defying gravity. It's got to come down at some point. We can't risk that, especially given the nature of our fund," the paper quoted Gao as saying. "The market is making me nervous."
...
In the first three months of the year punters in China opened 4.79 million new accounts, a 56-percent increase from the 3.08 million in the whole of 2006, the official Xinhua news agency reported citing government statistics.

Last week the number of new accounts in China's two exchanges in Shanghai and Shenzhen registered a record 252,000 new accounts in one day alone, the China Securities Regulatory Commission said.
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When everyone is rushing to invest in the stock markets, it is about time to time about getting out. I am increasingly getting concerned about the reports that Chinese nationals across all stratas are borrowing heavily to invest in the bouyant stock market.

Seems like my concern is being shared by certain quarters and I have to seriously think about shifting my holdings in Chinese equities somewhere else for the time being. There is no doubt that a MAJOR correction will occur in the China stock market but the question is when. Judging by the frenzy that the common people are in and the fact that China will be hosting the 2008 Olympics soon, it will be difficult to say for sure.

One time is certain though. When the China stock market does correct significantly, there is going to be much civil unrest. Amatuers to the stock market whom had borrowed heavily to speculate are going to lose their life savings. Suicide cases that mirrored the last Asian Financial Crisis will happen once more.

It will do good to spend some time to determine where to temporarily park funds which had been invested into China so as to re-enter the market after the correction.