This article is also available in Spanish.
Bitcoin fell to a low of $92,508 on January 8 after previously reaching $102,357 on Monday, representing a decline of nearly 10% in a matter of days. The immediate catalyst appears to be the rise in US Treasury yields on January 7, as the 10-year interest rate reached 4.67% on the heels of an unexpectedly strong ISM pay rates index and a higher-than-expected JOLTS job opening.
Why is Trump’s inauguration bullish for Bitcoin?
While these data points have renewed concerns about the possibility of continued inflation, many seasoned observers insist that Trump’s upcoming inauguration is a reason to remain bullish on Bitcoin and cryptocurrencies. Analysts from LondonCryptoClub (LDNCryptoClub) argue that “everyone is overestimating the likelihood of tariffs or at least their size,” highlighting that when Trump was previously in office, there was “no significant inflationary impact” despite high-profile tariff announcements.
Related reading
According to the analyst, market participants risk ignoring the fact that “the United States must also refinance over $7 trillion in debt this year,” which could force the Fed to keep interest rates low and eventually end quantitative tightening. Raoul Pal, founder of Global Macro Investor, echoed this sentiment by saying: “I tend to agree with that sentiment.”
I tend to agree with this https://t.co/SzmHbyXoBc
– Raoul Pal (@RaoulGMI) January 8, 2025
Proponents of the pro-Bitcoin thesis point out that any tariffs introduced under the new Trump administration may be significant politically but modest in practice, echoing LondonCryptoClub’s view that “Trump is going largely as a negotiation tactic and is likely to offer much less.” . Another pivotal point is the emerging liquidity scenario that has boosted risky assets in the past.
LondonCryptoClub sees the Fed as “eventually starting to flood the market with liquidity,” especially given the rapid exhaustion of the reverse repo facility and the potential temporary respite provided by the debt ceiling. The same argument extends to a renewed wave of “China-led global inflation slowdown,” which could pressure the United States to cut interest rates if growth shows signs of stalling.
Chris Burniske, partner at Placeholder VC, once said Presumably The market will rally right into the inauguration and then sell off, but is now anticipating another scenario: “I agree with this – in Q4 I was thinking we would rally at the inauguration and sell off after that, but once that became a big consensus + DXY and prices rose, We seem to be turning to Pain before, and Valhalla after – prefer this setting.”
Some analysts see immediate benefits if Trump starts discussing cryptocurrencies publicly again, given how that could raise Bitcoin’s profile. Cryptocurrency analyst Jamichan reminded his followers that “we have a president who will mention Bitcoin regularly” and stressed that a strong dollar could be “the fuel we pump to us when it goes down.”
Gamechan also stressed that “3-5% inflation is excellent for Bitcoin” and noted that while the Fed may keep interest rates high for now, it could “stimulate them at any time” because the government’s interest expenses It’s still uncomfortably large, with trillions in debt. To manage. This angle is further reinforced by talk that other global players, especially China, may continue to stimulate their economies, thus boosting overall liquidity.
We seem to have forgotten the following:
-We have a president who will mention Bitcoin regularly
-MSTR is listed on the NASDAQ
The Fed is in a great position and has room to juice it at any time
-3-5% inflation is excellent for BTC
Strong DXY means the fuel that pumps us when it falls
– The Fed needs to get…– Jamichan (@gamichan) January 8, 2025
Felix Goffin, host of the Forward Guidance podcast, He confirmed The broader shift in market psychology by saying: “We are rapidly moving from ‘selling the news’ to ‘buying the news’ at the inauguration.”
Related reading
Despite this generally optimistic narrative, challenges remain in the short term. Recent economic data in the United States surprised to the upside, raising concerns that the Federal Reserve may keep policy tighter for longer. Some investors believe that the next few weeks will be a tug of war between rising yields and the possibility of renewed global easing.
However, LondonCryptoClub argues that the jump in yields may be a temporary bluff and that once the Fed realizes how much refinancing needs to happen, it will be forced to “help keep interest rates low” and eventually return to “some form of easing.” Quantitative non-quantitative easing. “If the repo market shows signs of stress. Those who believe in the “buy the news” hypothesis expect that once the Fed’s liquidity taps are reopened, the price of Bitcoin will likely rebound from its current decline and perhaps continue to rise throughout 2025.
Market watchers also remember how the US dollar initially rose, during the previous Trump presidency, but quickly rose. “The market reacted this way the last time Trump was elected and the dollar quickly rose,” LondonCryptoClub noted, suggesting that a similar scenario could happen again, with the dollar rising briefly before weakening.
Combined with the potential for coordinated stimulus from major central banks, any sustained reversal in the dollar would likely be good news for Bitcoin and the broader cryptocurrency market.
At press time, Bitcoin was trading at $93,596.
Featured image created with DALL.E, a chart from TradingView.com
Comments are closed, but trackbacks and pingbacks are open.