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Bitcoin fell to a low of $92,508 on January 8, after hitting $102,357 on Monday, marking a decline of nearly 10% in a matter of days. The immediate catalyst appears to be the January 7 surge in US Treasury yields, with the 10-year rate hitting 4.67% following an unexpectedly strong ISM price paid index and JOLTS job opportunities higher than expected.
Why Trump’s Inauguration Is Bullish for Bitcoin
While this data renews concerns that inflation may persist, many expert observers insist that Trump’s impending inauguration is a reason to remain bullish on Bitcoin and cryptocurrencies. Analysts at LondonCryptoClub (@LDNCryptoClub) argue that “everyone is overestimating either the likelihood of tariffs or at least the size,” pointing out that when Trump was in office, there was “no material inflationary impact” despite high-profile tariff announcements .
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According to the analyst, market participants risk overlooking the fact that “the United States also needs to refinance more than $7 trillion in debt this year,” which could force the Fed to keep rates lower and ultimately to put an end to quantitative tightening. Raoul Pal, founder of Global Macro Investor, echoed this sentiment, saying: “I tend to agree with this interpretation.”
I tend to agree with this interpretation https://t.co/SzmHbyXoBc
— Raoul Pal (@RaoulGMI) January 8, 2025
Supporters of the pro-Bitcoin argument point out that any tariffs introduced under a new Trump administration could be politically high but practically modest, echoing LondonCryptoClub’s view that “Trump goes big as a negotiating tactic and probably offers much less.” Another focal point is the emerging liquidity landscape which has strengthened risky assets in the past.
LondonCryptoClub predicts that the Fed will eventually “start flooding the market with liquidity,” especially given the rapid depletion of the Reverse Repo Facility and the potentially temporary respite offered by the debt ceiling. The same argument extends to a renewed wave of “China-led global disinflation,” which could push the US to cut rates if growth shows signs of stalling.
Chris Burniske, a partner at Placeholder VC, said he once took for granted that the market would rally directly at the inauguration and then sell off, but now predicts another scenario: “”Agree with this – in the fourth quarter we thought we would rally until the inauguration and after the sell-off, but once this became too much of a consensus view + DXY and rising rates, it seems we are moving to pain first, Valhalla later – I prefer this setup, to tell the truth”
Some analysts see direct benefits if Trump begins publicly discussing cryptocurrencies again, as this could raise Bitcoin’s profile. Crypto analyst Gammichan reminded followers that “we have a president who will mention Bitcoin regularly” and stressed that a strong dollar could be “the fuel to pump us up when it collapses.”
Gammichan also pointed out that “3-5% inflation is excellent for BTC” and noted that while the Fed could keep rates high for the time being, it could “squash them every time” because government interest expenses remain uncomfortably high, with trillions of debt. manage. This outlook is further strengthened by rumors that other global players, particularly China, may continue to stimulate their economies, thereby increasing overall liquidity.
We seem to have forgotten:
-We have a president who will regularly mention Bitcoin
-MSTR is on the NASDAQ
– The Fed is in a great position and has room to exploit it at any time
Inflation of -3-5% is excellent for BTC
-Strong DXY means fuel to pump us when it falls
– The Fed must get…— Gammichan (@gammichan) January 8, 2025
Felix Jauvin, host of the Forward Guidance podcast, highlighted the broader shift in market psychology by saying, “We are rapidly moving from ‘selling the news’ to ‘buying the news’ at the inauguration.”
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Despite this generally optimistic narrative, short-term challenges remain. Recent economic data in the United States surprised to the upside, raising concerns that the Federal Reserve may maintain tighter policy for longer. Some investors see the next few weeks as a tug of war between rising yields and the prospect of renewed global easing.
However, LondonCryptoClub argues that the jump in yields could be a temporary faux pas and that once the Fed recognizes how much refinancing needs to be done, it will be forced to “help keep rates low” and eventually return to “a some form of “non-QE QE.”” if the repo market shows signs of stress Those who believe in the “buy the news” thesis anticipate that as soon as the Fed’s liquidity spigots reopen, Bitcoin’s price will likely recover from its current collapse and perhaps continue to rise throughout 2025.
Market observers also recall how, during Trump’s previous presidency, the US dollar initially appreciated, and then quickly reached a high. LondonCryptoClub noted that “the market reacted this way the last time Trump was elected and the dollar quickly peaked,” suggesting that a similar scenario could repeat itself, with the dollar rallying for a short period before weaken.
Combined with the possibility of coordinated stimulus from major central banks, any sustained reversal in the dollar would likely represent good news for Bitcoin and the cryptocurrency market in general.
At the time of writing, BTC was trading at $93,596.
Featured image created with DALL.E, chart from TradingView.com