By Tommy Reggiori Wilkes and Hannah Lang
LONDON/NEW YORK (Reuters) - Cryptocurrency prices are down sharply in recent weeks and not expected to rebound soon, with some of the biggest digital currencies erasing nearly all of the gains they made after Donald Trump's election win triggered a wave of excitement across the industry.
Some analysts said the market is likely to remain subdued while waiting for a bullish signal, such as indications that the U.S. Federal Reserve plans to cut interest rates or a clear pro-crypto regulatory framework from the Trump administration.
Bitcoin, the biggest cryptocurrency, has fallen 21% from a January 20 peak and is back to levels seen shortly after Trump's U.S. presidential election victory in November, as hopes for a strategic bitcoin reserve fade and tariff threats weigh on demand for speculative assets.
Other cryptocurrencies have fallen faster, with ether down more than 40% since December.
Trump's own so-called meme coin, which he launched days before his inauguration in a move that sparked conflict-of-interest concerns, is down 80% from a January peak, according to CoinMarketCap data.
The U.S. president promised a wave of pro-crypto moves during his campaign, vowing to be a "crypto president." He pledged to set up a national bitcoin stockpile while overhauling crypto regulations, and named crypto proponents Howard Lutnick and David Sacks to prominent posts within his administration.
Under Trump, the Securities and Exchange Commission has withdrawn investigations into several crypto companies and dropped a lawsuit against Coinbase (NASDAQ:COIN), the largest crypto exchange in the U.S. But those moves have had little impact on crypto prices and some industry analysts say expectations about Trump may have been too lofty.
In an executive order during his first week in office, Trump ordered the creation of a cryptocurrency working group tasked with proposing new digital asset regulations and looking into creating a national crypto stockpile, to the dismay of some investors who had hoped he would instruct the U.S. to start buying bitcoin.
"The market is disappointed with that," said James Butterfill, head of research at asset manager CoinShares.
Crypto prices are also facing headwinds from more hawkish monetary policy and Trump's threat of tariffs, he added.
"That's increasing all this market uncertainty, which is absolutely not helping bitcoin at all. Until we get (clarity on a bitcoin reserve), I can't see prices recovering significantly," said Butterfill.
Since a December peak, almost $1 trillion has been wiped in nominal value from the global crypto market, with total market capitalisation now around $2.76 trillion, according to CoinMarketCap.
Some investors have had to reset expectations, with preliminary reports from Trump's new crypto working group not due for at least another month.
"The initial excitement surrounding the Trump administration’s perceived pro-crypto stance appears to be in a phase of recalibration," said Gabe Selby, Head of Research at CF Benchmarks, a digital asset index provider.
"For sentiment to shift more decisively, a clearer regulatory framework or a major catalyst - such as additional ETF (exchange traded fund) approvals or policy shifts - seems to be necessary."
The SEC approved the first ETFs tied to the spot price of bitcoin last year, which catapulted the cryptocurrency to a new record high.
Still, some market watchers are as bullish as ever.
Standard Chartered (OTC:SCBFF) analyst Geoff Kendrick is sticking with a target for bitcoin to hit $500,000, against a record high of $109,071, before Trump leaves office. He said central to that is a belief new buyers will enter the market.
Regulatory filings in the U.S. showed that while hedge funds remain the dominant crypto buyers, banks and sovereign wealth funds are buying too, Kendrick added.
Quarterly filings showed that asset managers boosted allocations to U.S. ETFs tied to the price of spot bitcoin in the fourth quarter of 2024, with Mubadala Investment Co - an Abu Dhabi sovereign wealth fund - reporting a stake in BlackRock (NYSE:BLK)'s iShares Bitcoin ETF worth $436.9 million.