finanzwelt: How Political Events and Market Psychology Drive the Crypto Market

Moritz Schildt, the CEO of coinIX has written an article on finanzwelt. Click here to access the original article. In this article we present you the english translation of the article.

The recent electoral victory of Donald Trump and his crypto-friendly announcements have sent the crypto market into turmoil. Bitcoin reached a new all-time high, and altcoins like Ethereum and Dogecoin followed suit. But what are the mechanisms behind these movements, and why do altcoins tend to follow Bitcoin’s price with a delay?

Since its introduction in 2009, Bitcoin has been the undisputed leading currency of the crypto market. As digital gold with the largest market capitalization, it attracts not only the attention of the public but also the capital of institutional and private investors.

As experts emphasize, the price of Bitcoin typically rises first after a so-called halving event. This event reduces the supply of new Bitcoins and creates inflationary pressures, often leading to a price jump. This shows a clear cyclical trend: after the halving, which last took place in April 2024, Bitcoin surged by over 100 percent in just a few months, while Ethereum and other altcoins followed much later. This delay can be attributed to two factors: First, capital remains tied up in Bitcoin initially, before investors diversify into riskier altcoins with their profits. Second, the smaller market capitalization of many altcoins is responsible for more pronounced price fluctuations, as even small inflows of capital can trigger significant price changes.

Altcoins like Ethereum Benefit from Their Smaller Market Capitalization

This dominant role results in Bitcoin price jumps often acting as a signal for other cryptocurrencies — the so-called altcoins — to follow with a delay. After a Bitcoin price surge, capital first flows into this safe haven before investors consider riskier altcoins. Historically, capital flows into Bitcoin first, as it is seen as relatively safe. Once Bitcoin shows significant gains, investors diversify their portfolios and invest in smaller, riskier cryptocurrencies. Altcoins like Ethereum benefit from their smaller market capitalization, which allows for larger price movements even with smaller capital inflows. Cyclical patterns reinforce this phenomenon: after each Bitcoin halving, which halves the supply of new Bitcoins, a phase of rising prices follows. These price increases typically pull altcoins along with them, as data from the 2016–2020 and 2020–2024 cycles show.

Current Developments: Trump’s Election Victory as a Catalyst

For example, Ethereum has regularly outperformed Bitcoin in later phases of these cycles. With an all-time high of around 4,100 euros in 2021, Ethereum shows strong potential to recover more significantly with a delay. Currently, the price remains well below this peak, which leaves room for growth. A key factor to watch is the Ethereum/BITcoin ratio. It is currently nearing a low point not seen since 2019, which suggests that Ethereum is relatively undervalued. This phase could be seen as an opportunity, as Ether has shown strong recoveries in similar situations in the past.

Donald Trump’s election victory in November 2024 and his crypto-friendly agenda have further fueled the market. Trump announced plans to make the U.S. the “crypto capital of the planet,” with measures such as a national Bitcoin reserve.

These announcements immediately sparked confidence among investors, leading to a Bitcoin price jump above 90,000 USD. At the same time, altcoins also saw significant gains. Ethereum rose to over 3,000 USD, while Dogecoin saw a 107 percent increase within a week. The prospect of less restrictive regulation under the new U.S. administration led investors to increasingly consider riskier cryptocurrencies.

Market Psychology and Capital Flows

Crypto markets are heavily influenced by investor psychology. Bitcoin acts as an anchor of confidence in this regard. When it rises, overall market confidence grows, and the willingness to invest in altcoins increases. This mood encourages investors to shift profits from Bitcoin into more speculative altcoins.

Additionally, technological developments and partnerships — such as those seen with Ethereum — play a role in strengthening confidence in altcoins. The current market situation reflects exactly this dynamic: after the Bitcoin price surge, capital flowed into altcoins, which, due to their smaller market capitalization, were able to achieve larger relative gains.

The relationship between Bitcoin and altcoins is a prime example of the symbiosis between market psychology and political dynamics. Donald Trump’s election victory clearly illustrates how political events can influence price movements in the crypto market. The positive market sentiment following Trump’s election led to increased capital inflows into the crypto market. Investors expect fewer regulatory hurdles and greater acceptance of cryptocurrencies under the new administration. This has not only boosted Bitcoin but also altcoins, as investors seek higher returns and diversify into crypto assets. Bitcoin remains the driving force, but altcoins like Ethereum offer attractive growth opportunities due to their higher volatility and smaller market capitalization — albeit with increased risk. Investors who understand these connections can strategically benefit from the different market cycles.

Market Commentary by Moritz Schildt, Board Member of the investment company coinIX.

About coinIX

coinIX GmbH & Co. KGaA was founded in 2017 to build expertise in the field of cryptocurrencies and blockchain-based business models. As an investment company based in Hamburg, the company aims to analyze attractive investment opportunities in the cryptocurrency and blockchain technology markets and identify potential opportunities. This allows for participation in the growth potential of this emerging market while benefiting from the long-term positive value development of the acquired assets. To achieve this, coinIX focuses on liquid cryptocurrencies, token projects, and equity investments through the fund coinIX COINVEST SCI1.

The investment team combines deep technological know-how with expertise in digitalization projects and combines experience in cryptocurrencies, capital investments, venture capital, and legal expertise. This enables the team to quickly assess the potential of possible investments and implement a wide range of investment forms. The shares of coinIX GmbH & Co. KGaA are traded on the over-the-counter market at the Düsseldorf Stock Exchange, the Berlin Stock Exchange, and the Munich Stock Exchange, and can be purchased through any custodial bank.

About coinIX COINVEST SCI1

Launched in June 2022, coinIX COINVEST SCI1 is an open domestic special AIF under the KAGB. As a sub-portfolio of coinIX COINVEST Investment Stock Corporation with variable capital, its assets are managed by coinIX Capital GmbH, acting as a registered capital management company. Available for subscription by professional or semi-professional investors, the fund has the flexibility to invest up to 100% of its capital in crypto assets, aiming for a diversified portfolio of digital assets actively managed through ongoing selection processes. Additional income streams are generated through staking and other blockchain-native mechanisms. With the ISIN DE000A408Q55, subscriptions to the fund are only available directly through the investment company, with private investor acquisition prohibited.