An illustration shows a Bitcoin mockup in front of an image of U.S. President-elect Donald Trump. EPA-Yonhap

With the inauguration of U.S. President Donald Trump, who has dubbed himself the "crypto president," market insiders and investors are eagerly watching whether the crypto market will sustain its momentum.

Their anticipation is well-founded. Over the past year, Bitcoin's price has surged about 125 percent, far outperforming the annual returns of the U.S. stock market and gold. Heightened expectations for pro-crypto policies have driven Bitcoin to the $100,000 so-called "dream level" for the first time.

They say the outlook for U.S. crypto policy has never been better. Tom Lee, managing partner and the head of research at Fundstrat Global Advisors, touted Bitcoin, stating, "Never in financial history has anything reached $2 trillion [in size and] disappeared."

Such dramatic growth was followed by Trump's bold promises during the presidential election campaign. They include eliminating regulations in the crypto sector and designating Bitcoin as a national strategic reserve asset.

Trump has also filled key administration positions with pro-crypto figures. Paul Atkins, known for his favorable stance on digital assets, was nominated as the next chair of the U.S. Securities and Exchange Commission. Treasury Secretary nominee Scott Bessent drew attention for including Bitcoin exchange-traded funds in his personal portfolio. Notably, Elon Musk is also poised to head the newly formed Department of Government Efficiency, while former PayPal executive David Sacks was named the new White House "cryptocurrency and AI czar."

"With the Republican Party now in control of both the Senate and the House of Representatives, the likelihood of passing various legislation to address regulatory uncertainties in the virtual asset market has significantly increased," wrote Kim Kab-lae and Hwang Sei-woon, senior research fellows at Korea Capital Market Institute, in a recent report.

Global investment bank Bernstein has predicted that Bitcoin could reach as high as $200,000 in 2025, driven by growing institutional and government demand. Standard Chartered echoed the same optimism.

"The shift from regulatory uncertainty to a clear legal framework would likely encourage institutional adoption and further integrate digital assets into the traditional financial system," crypto market intelligence firm Messari also wrote in its recent report.

An illustration shows a picture of Bitcoin displayed beside a screen showing its trading chart. AFP-Yonhap

However, much remains to be proven. Some caution that many of the anticipated policy benefits may already be priced in, urging investors to hold a more conservative outlook.

As expectations for the Federal Reserve (Fed) interest rate cuts diminish, Bitcoin, a risky asset, fell below $90,000 on Jan. 14 — its lowest level in two months.

"We anticipate that Bitcoin will experience a period of consolidation until mid-March or early May, as financial markets, including Bitcoin, process the Fed's hawkish stance on inflation," Markus Thielen, founder of 10x Research, said. "Furthermore, this period of consolidation is being exacerbated by selling pressure from older Bitcoin wallets, which are taking profits at current levels."

Internal disagreements over crypto's institutionalization could also pose risks. In December, Fed Chair Jerome Powell expressed opposition to supporting the incoming administration's strategic Bitcoin holdings, briefly pushing Bitcoin's price below the $100,000 mark.

Nor can we overlook the unpredictable nature of Trump's leadership style. Some believe there is a chance that he could reverse his pro-crypto stance to prioritize the U.S. dollar hegemony, a move aligned with national interest.

"A shift toward a hostile stance on crypto could occur if an economic crisis undermines the dollar's position, particularly if capital flows into crypto or if the BRICS (Brazil, Russia, India, China and South Africa) financial system gains significant traction," Messari noted. "The risk of a reversal in sentiment toward crypto is not zero."

Impact on Korea

But why is the U.S. taking such bold actions in the first place?

Kim and Hwang noted that "maintaining a leading position in the digital asset market could be a crucial factor in sustaining America's global influence in the future."

If the Trump administration eventually resolves the regulatory uncertainties and fosters policies to encourage innovation, it could lead to a concentration of related industries and capital in the U.S. This would position the country as a global standard-setter for crypto regulations.

Such a shift could have significant global ripple effects. Market watchers caution that Korea must closely monitor its legislative outcomes.

"While it is true that there are significant differences in perception of digital assets in Korea, it is essential to consider that failing to prepare for the potential growth of the digital asset market poses an even greater risk," Kim and Hwang added.