Market indicators and derivatives trading data point to an anticipated Bitcoin price rally following President-elect Donald Trump's inauguration on January 20, with traders positioning themselves for potential record-breaking highs in the coming months.
In a significant market move, a trader on cryptocurrency exchange Deribit committed over $6 million to purchase $100,000 strike call options expiring on March 28, according to data from Amberdata. This substantial investment signals strong bullish sentiment in the market, with Amberdata noting on X that "This trade anticipates that new highs for bitcoin will be broken just a few months after Trump officially takes office."
The bullish outlook is further reinforced by trading activity at even higher strike prices, with traders showing notable interest in $120,000 strike calls. These options currently hold the position as Deribit's most popular contracts, commanding a substantial notional open interest of $1.52 billion. The cryptocurrency market's optimism appears well-founded, with Bitcoin recently demonstrating resilience by recovering 8% from its December 30 low of $91,384 to trade above $99,500. This recovery comes as market participants position themselves for potential policy shifts under the incoming administration.
Greg Magadini, director of derivatives at Amberdata, emphasizes the timing's significance in his weekly newsletter: "The inauguration and right after will be a prime-time for bullish announcements and policies that could be bullish catalysts for bitcoin to move higher."
Regulatory expectations are playing a crucial role in market sentiment. CF Benchmarks, a regulated cryptocurrency index provider, suggests in their annual report that "A restructured SEC under procryptocurrency leadership may reduce enforcement risks and foster innovation. These changes, coupled with streamlined compliance requirements, could enhance investor confidence." However, they cautioned that "implementation delays or policy shifts may temper market optimism, creating short-term volatility."
The market's response to Trump's election victory in November has already demonstrated the impact of political developments on cryptocurrency prices, with Bitcoin surging from approximately $70,000 to breakthrough highs above $108,000 in the weeks following the election results.
However, analysts are closely monitoring potential headwinds, particularly the Federal Reserve's upcoming interest rate decision on January 29. Markus Thielen, founder of 10x Research, identifies this as a critical factor that could influence the anticipated rally. His analysis suggests a potentially positive start to January, with a temporary pullback possible around the January 15 Consumer Price Index (CPI) data release.
The current market sentiment remains notably bullish, as evidenced by the Crypto Fear & Greed Index reaching the "Extreme Greed" zone with a score of 76 out of 100 as of January 5, coinciding with Bitcoin's rise to $98,850.
Looking ahead, industry experts offer varying price predictions. John Glover, chief investment officer at crypto lending firm Ledn, presents a nuanced forecast, suggesting a possible dip to $89,000 before a significant rebound to $125,000 by the end of the first quarter. His longer-term outlook is even more optimistic, projecting Bitcoin could reach $160,000 by late 2025 or early 2026.
The market's immediate focus remains on the potential impact of the Fed's monetary policy. The CME Group's FedWatch tool indicates an 88.8% probability that the federal target rate will remain between 425 and 450 basis points, following December's meeting where projected interest rate cuts for 2025 were revised down from five to two. This adjustment previously triggered a 15% decline in Bitcoin's value to approximately $92,800.
Despite these monetary policy considerations, the derivatives market continues to signal strong bullish sentiment. The significant open interest in high-strike call options suggests traders are positioning for substantial upside potential in the coming months, with particular focus on the post-inauguration period as a potential catalyst for the next Bitcoin price rally.
As the market approaches these critical dates, traders and investors remain focused on both the political transition and monetary policy developments, with the combination of these factors likely to influence Bitcoin's price trajectory in the early months of 2024.