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Bitcoin fell to a low of $92,508 on January 8 after reaching $102,357 earlier on Monday, marking a drop of almost 10% in a few days. The immediate catalyst appears to be the spike in US Treasury yields on January 7, with the 10-year yield reaching 4.67% following an unexpectedly strong ISM Price Paid Index and higher-than-expected JOLTS vacancies.
Why Trump’s Inauguration is Bullish for Bitcoin
While this data renewed concerns that inflation could persist, many seasoned observers emphasize that Trump’s upcoming inauguration is a reason to remain bullish on Bitcoin and crypto. The analysts at LondonCryptoClub (@LDNCryptoClub) claim that “everyone is overestimating both the likelihood of tariffs and at least their magnitude,” highlighting that when Trump was previously in power, there was “no substantial inflation impact,” despite high-profile tariff announcements.
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According to the analyst, market participants risk ignoring the fact that “the US also needs to refinance more than $7 trillion of debt this year,” which could force the Fed to keep rates lower and ultimately end the quantitative tightening. Raoul Pal, founder of Global Macro Investor, echoed this sentiment, saying, “I tend to agree with this statement.”
I tend to agree with this statement https://t.co/SzmHbyXoBc
— Raoul Pal (@RaoulGMI) January 8, 2025
Proponents of the pro-Bitcoin thesis point out that any tariffs implemented under a new Trump administration could be politically large but practically modest, echoing the LondonCryptoClub view that “Trump goes big as a negotiating tactic and is likely to deliver far less .” Another area of concern is the emerging liquidity scenario that has strengthened risky assets in the past.
LondonCryptoClub sees the Fed eventually “starting to flood the market with liquidity,” especially given the rapid depletion of the Reverse Repo Facility and the potential temporary reprieve provided by the debt ceiling. The same argument extends to a new wave of “China-led global disinflation,” which could force the United States to cut interest rates if growth shows signs of stagnation.
Chris Burniske, a partner at Placeholder VC, said yes accepted the market would recover right at the inauguration and then sell, but he now foresees a different scenario: ““I agree with this – in the fourth quarter we thought we would rally in the inauguration and then sell, but then that once became too consensus + DXY and prices are rising, it seems that we are going to pain rather, then to Valhalla – prefer this setup”
Some analysts see immediate benefits from Trump publicly talking about crypto again, given how it could raise Bitcoin’s profile. Crypto analyst Gammichan reminded his followers that “we have a president who will mention Bitcoin regularly” and emphasized that a strong dollar “could be fuel to pump us up if it falls.”
Gammichan also emphasized that “3-5% inflation is excellent for BTC” and noted that while the Fed could keep rates high for now, it “could tap into it at any time” as the government’s own interest costs become uneasy remain high, with trillions in debt. to manage. This angle is further reinforced by rumors that other global players, especially China, could continue to stimulate their economies, increasing overall liquidity.
We seem to have forgotten the following:
-We have a president who will mention Bitcoin regularly
-MSTR is on the NASDAQ
-Fed is in a great position with room to squeeze juice from it at any time
-3-5% inflation is excellent for BTC
-Strong DXY means fuel to pump us as it falls
-The Fed should…— Gammichan (@gammichan) January 8, 2025
Felix Jauvin, host of the Forward Guidance podcast, underlined the broader shift in market psychology by stating, “We are quickly moving from ‘selling the news’ to ‘buying the news’ at the inauguration.”
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Despite this generally optimistic story, short-term challenges remain. Recent economic data in the United States has delivered a positive surprise, raising concerns that the Federal Reserve may hold policy for even longer. Some investors see the coming weeks as a battle between rising rates and the prospect of renewed global easing.
Yet LondonCryptoClub argues that the jump in rates could be a temporary head fake and that once the Fed realizes how much refinancing is needed, it will be forced to “keep rates low” and eventually return to “a or other form of ‘non-QE QE’. ‘” if the repo market shows signs of stress. Those who believe in the “buy the news” thesis expect that once the Fed’s liquidity taps open again, Bitcoin’s price will likely recover from the current slump and possibly continue higher into 2025.
Market watchers also recall how the US dollar initially appreciated during Trump’s earlier presidency but quickly peaked. LondonCryptoClub noted that “the market reacted this way the last time Trump was elected and the dollar quickly peaked,” suggesting a similar scenario could play out again, with the dollar rising briefly before weakening.
Combined with the possibility of coordinated stimulus from major central banks, any sustained dollar reversal would likely spell good news for Bitcoin and the broader crypto market.
At the time of writing, BTC was trading at $93,596.
Featured image created with DALL.E, chart from TradingView.com