Bitcoin Alert: Here’s Why The Trump Inauguration Is A ‘Buy The News’ Event

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On January 8, Bitcoin dropped to a record low of $92,508, having peaked at $102,357 just three days prior on Monday. This represents a nearly 10% decline within a short timeframe. The apparent cause seems to be the surge in US Treasury yields on January 7, with the 10-year yield climbing to 4.67%. This rise occurred after an unexpectedly robust ISM Prices Paid Index and more job openings than expected according to the JOLTS report were announced.

Why The Trump Inauguration Is Bullish For Bitcoin

Despite concerns that inflation might continue due to recent data points, several experienced analysts remain optimistic about Bitcoin and cryptocurrency, especially with the upcoming Trump inauguration. The experts from LondonCryptoClub (@LDNCryptoClub) contend that the probability of tariffs, or at least their potential impact, is being overestimated. They emphasize that during Trump’s previous term in office, there was little significant inflationary effect, even with high-profile tariff announcements.

Analysts warn that market participants might overlook the significant fact that the U.S. needs to refinance approximately $7 trillion in debt this year. This could potentially compel the Federal Reserve to maintain lower interest rates and ultimately halt quantitative tightening. Raoul Pal, the Founder of Global Macro Investor, concurs with this perspective, stating, “I generally agree with this viewpoint.

I tend to agree with this take

— Raoul Pal (@RaoulGMI) January 8, 2025

Advocates of the Bitcoin argument note that potential tariffs under a new Trump administration could appear significant politically, but may end up being relatively minor in practice, following the London Crypto Club’s perspective that “Trump often makes grand gestures as part of his negotiation strategy and typically delivers less.” Another key consideration is the increasing liquidity situation that has historically bolstered high-risk assets.

As a researcher, I foresee the Federal Reserve gradually increasing liquidity in the market, considering the rapid exhaustion of the Reverse Repo Facility and the tentative relief provided by the debt ceiling extension. Similarly, a renewed wave of global disinflation led by China could compel the U.S. to implement interest rate reductions if economic growth indicators suggest a slowdown.

Chris Burniske, partner at Placeholder VC, initially believed the market would gradually rise towards the inauguration and then decline afterward. However, he now anticipates a different sequence of events: “I agree with this perspective – in Q4, I thought we’d rally into the inauguration and sell off later, but as that view became too widely held and the DXY and interest rates started to increase, it seems we might be moving towards experiencing difficulties beforehand, followed by a period of relief, which I personally prefer.

Certain analysts believe that a resurgence of discussions about cryptocurrency by Trump could boost Bitcoin’s visibility, given the potential impact. Crypto expert Gammichan highlighted to his followers that “we have a president who frequently talks about Bitcoin,” and underscored that a robust dollar might serve as additional fuel when Bitcoin drops in value.

Gammichan emphasized that a “3-5% inflation rate is beneficial for Bitcoin,” and pointed out that although the Federal Reserve might maintain high rates currently, it could increase liquidity whenever needed due to the significant government debt, totaling trillions of dollars. This perspective is strengthened by discussions about other major economies, particularly China, potentially continuing economic stimulation, thereby increasing overall liquidity.

It appears we’ve overlooked the fact that:
-Our president often discusses Bitcoin
-MSTR is listed on NASDAQ
-The Fed holds a favorable position, allowing for potential growth
-Moderate inflation (3-5%) benefits Bitcoin
-A strong U.S. Dollar (DXY) provides momentum during its decline
-The Fed should take action to stimulate the economy further

— Gammichan (@gammichan) January 8, 2025

Felix Jauvin, the host of the Forward Guidance podcast, emphasized a significant change in market mentality by saying, “The trend is swiftly moving from ‘selling news’ to ‘buying news’ following the inauguration.

Even though things appear optimistic overall, there are temporary hurdles yet to be overcome. The latest American economic reports have exceeded expectations, leading to concerns that the Federal Reserve may maintain its tight policies for an extended period. Some investors view the upcoming weeks as a struggle between increasing interest rates and the potential for further global monetary relaxation.

LondonCryptoClub suggests that the surge in yields could be a misleading short-term trend, and once the Federal Reserve acknowledges the extensive refinancing needed, it may feel compelled to maintain low rates by resorting to a “not quite QE” strategy if the repo market shows signs of strain. Advocates of the “buy the news” theory expect that as soon as the Fed resumes injecting liquidity, Bitcoin’s price might recover from its current dip and potentially climb higher through 2025.

Market analysts remember that during Trump’s early presidency, the U.S. dollar initially strengthened but soon reached its peak. LondonCryptoClub pointed out that “the market behaved in this manner when Trump was elected last time, and the dollar peaked quickly.” This could imply that a similar pattern may occur again: the dollar might surge temporarily before weakening once more.

In conjunction with the potential synchronized action by leading central banks, a prolonged shift in the value of the U.S. dollar could potentially bring positive implications for Bitcoin and the entire cryptocurrency market.

At press time, BTC traded at $93,596.

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2025-01-10 01:17