Trump's Impact on Crypto Markets and the Search for a New Crypto Catalyst in 2026
Summary
- Crypto markets have lost their idiosyncratic narratives (DeFi, NFTs) and are currently trading with a high correlation to US TradFi (S&P 500, Nasdaq).
- The market is currently choppy and directionless, driven by headline risk regarding Trump's cabinet picks (Kevin Walsh) and tariffs.
- A "Midterm Election" thesis suggests the administration will be incentivized to stimulate the economy/markets leading into late 2026, which would drag crypto higher alongside equities.
- The "Hawkish Walsh" narrative is fading, stabilizing markets after an initial sell-off.
Trade Ideas
"Initial reaction was that indeed... [Kevin Walsh] was going to be a hawk... now you're seeing a bit of a stabilization as traders are re-evaluating... maybe he's actually not as hawkish." The market priced in a worst-case scenario (aggressive tightening) upon the Walsh nomination news. As this narrative softens and traders realize he may be more pragmatic (or pressured by Trump), the "fear discount" applied to risk assets over the last few weeks will unwind. Watch for a stabilization bounce as the "Hawk" narrative fades. Walsh actually implements aggressive hawkish policies once confirmed.
"There's an increasing convergence between the fortunes of the crypto market to the broader global trad macro factors... whenever S&P or NASDAQ go up or down, Bitcoin and much of the crypto world... follows very closely." Crypto currently lacks an internal catalyst (like a new DeFi summer). It has become a high-beta proxy for US Tech. The speaker notes that because it is a midterm election year (2026), Trump is "incentivized to achieve certain outcomes" (rate cuts/higher markets). If the administration pumps the stock market for political reasons, crypto will rise purely on correlation. Long exposure to US Indices and Major Crypto assets as a play on political stimulus. Decoupling where stocks rise but crypto lags due to regulatory headwinds or lack of innovation.
Losi L
Managing Director, Oros Hong Kong
"Any little thing could set the market off... whether it be a Japanese macro headline... JGBs and the USD yen FX rates." The speaker highlights that the market currently "lacks a clear direction" and is hypersensitive to external macro shocks. Japanese monetary policy remains a primary source of volatility (carry trade unwind risk) that can jolt global liquidity. Monitor JPY and JGB yields as leading indicators for volatility spikes in risk assets. Sudden BoJ intervention causing a liquidity shock.
