As the world prepares for the inauguration of pro-crypto President-elect Donald Trump on January 20, optimism is building among crypto traders. There is growing anticipation that Bitcoin will break past its previous record highs amid a backdrop of volatile trading.
In recent days, Bitcoin has experienced an 11% increase from its lows earlier in the week, breaching the $100,000 mark briefly, according to CoinDesk.
The surge, reflecting broader market risk-taking, was spurred by a milder-than-expected core CPI report that eased concerns about a hawkish Federal Reserve stance. Instead, market participants are zeroing in on Trump's impending swearing-in and the possibility of a favorable crypto policy announcement on his first day in office.
"The diminishing fear of inflation opens a pathway for Bitcoin to confidently breach the $100,000 resistance level ahead of Trump's inauguration," commented Matt Mena, a crypto research strategist at 21Shares, in an email. Achieving such a milestone holds both psychological and technical significance. It would set Bitcoin up to surpass its all-time high of $108,000 and achieve new record levels as market confidence strengthens. 21Shares is recognized as one of the largest crypto-native issuers of exchange-traded products (ETPs). Trump's reputation for advocating pro-growth measures and championing asset price appreciation solidifies the optimistic outlook for Bitcoin and broader risk assets, Mena further elaborated.
The optimistic forecasts align with a rally seen in traditional assets, particularly the Nasdaq 100 index, which climbed over 2% on Wednesday. Bitcoin has recently intensified its positive correlation with the tech-centric index, reaching a two-year peak. Meanwhile, the rally in the dollar index, which measures the greenback against major fiat currencies, has hit a pause, offering a lifeline to risk assets as the S&P 500 approaches the pivotal 6,000 mark. Mena noted that a breach above this level "could catalyze the next phase of the global asset bull market."
Initially a skeptic of digital currencies, Trump won over the crypto community leading up to the November election, promising to forge a national strategic Bitcoin reserve. This commitment played a crucial role in Bitcoin's climb from $70,000 to beyond $108,000. "If Trump signals on his first day that a Strategic Bitcoin Reserve is forthcoming, even without signing it immediately, we could see asymmetric price discovery," stated Nathan Cox, the chief investment officer at Two Prime, in an email. Breaking past previous highs of $108,000 could lead to swift expansion due to the unprecedented demand a Bitcoin reserve strategy might generate on a global scale. Two Prime is an SEC-regulated investment adviser specializing in digital asset derivatives.
However, volatility remains likely. Paul Howard, a senior director at crypto market-making firm Wincent, pointed out that anticipated announcements regarding digital asset regulation, banking rules, and the strategic Bitcoin reserve are not fully priced into current valuations.
"We are bracing for a volatile week ahead as the U.S. undergoes this administrative transition. Expect some ±10% movements across major currencies like BTC, SOL, ETH, and XRP. Pricing outcomes will hinge on the announcements made by the incoming President, so current valuations likely don't capture every eventuality," Howard noted.