Can we say, conflict of interest, boys and girls? Last month Bloomberg wrote about how the Trump election has energized previously “sleepy decentralized-finance cryptocurrencies.” Not only has Bitcoin rallied since the election but so have many niche cryptocurrencies. Where we believe the conflict of interest may come into play is where Trump’s crypto project is busy buying up many such niche tokens when he will have the power to influence their values in the coming years. So, how much richer will Trump get with niche crypto investments?
DeFi and Investable Tokens
The point of crypto tokens was originally to be a useful and safe medium of exchange for transactions via the internet and spanning the globe. However, a funny thing happened on the way to attaining that goal. Crypto tokens became speculative assets. Rather than using these tokens to do business via decentralized finance, many are simply buying and selling in search of short term profits. While Bitcoin, Ether, and a handful of other major tokens have gotten the most publicity, the potential profits are commonly greater for niche tokens whose value may multiply overnight under the right market circumstance.
Cryptocurrencies and Market Manipulation
We have written about the risks of Bitcoin wash trading. This is a form of market manipulation in which traders simultaneously buy and sell tokens and create the impression of an active market with much profit potential. Sadly, too many naïve traders get pulled into crypto markets under such circumstances only to buy high and sell low and the instigators of the wash trading walk away with the profits. However, wash trading is likely to be small potatoes when compared to the ability of those who run the government, make the laws, and set the regulations in the crypto world. Image someone planning to announce specific crypto regulations that are likely to cause a huge rally in a handful of tokens. Then the individual or individuals responsible for such laws and regulations buy selected niche tokens and wait for the rally.
Crypto Rally Under Trump
Under the Biden administration and especially after crypto winter, regulation increased in order to protect investors in tokens and crypto businesses. During the presidential campaign Trump promised to roll back regulations and that is a big reason for the current and expected rallies of a whole host of crypto tokens. Donald Trump has shown himself to be perfectly willing to use the presidency and all of its power to further his and his family’s financial interests. There is no reason to expect anything different as the crypto niche token story advances.
Is the Coming Explosion of Niche Crypto Token Prices an Investment Opportunity?
Something that we at ProfitableInvestingTips.com have tried to make clear to our readers over the years is that there is long term investing and short term trading. The factors that drive long term value are not necessarily those that determine short term prices. Certainly when something dramatic happens to the fundamentals of an investment it will cause an immediate price increase. However, markets are always trying to see the future and commonly overreact to the news. Also, some factors that may appear to be long term issues are really not. That may well be the case here. There is an assumption when niche crypto prices go up at the prospect of less regulation. It is that less regulation will lead to more value and profitability. We saw during crypto winter how market makers mismanaged their businesses, mistakenly believed that crypto always went up, and committed outright fraud. Anyone who tries to profit from the Trump niche crypto rally should probably plan to take at least some of their profits early until the longer term situation becomes more clear!
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