Bitcoin (BTC-USD) briefly exceeded the $100,000 mark three times on Thursday before settling slightly lower. This surge coincides with easing US inflation data, as December’s Consumer Price Index (CPI) indicated reduced inflationary pressures, and the upcoming inauguration of Donald Trump on January 20th.
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According to Coingecko, Bitcoin reached $100,000 momentarily before retracing to $99,500 on Thursday. Other cryptocurrencies also experienced significant gains: Ethereum (ETH-USD) climbed above $3,300, Solana (SOL-USD) surpassed $200, and XRP (XRP-USD) saw an impressive 8% daily increase and a 34% surge over the past week.
Trump’s Pro-Crypto Stance Drives Market Sentiment
Market participants are enthusiastic about the incoming president’s anticipated pro-crypto policies. One notable proposal is the establishment of a “strategic bitcoin reserve” for the US government, mirroring the strategic petroleum reserve. This initiative would involve the government acquiring and holding substantial amounts of Bitcoin. Proponents believe this could trigger a global crypto race, with other nations emulating the US strategy.
QCP Capital analysts recently stated, “The Trump administration includes crypto-friendly personnel, and rumors of Trump enacting broad pro-crypto executive orders have provided a short-term boost for Bitcoin.”
Easing Inflation Bolsters Risk-On Appetite
The December CPI report indicated a continued cooling of inflation, with headline CPI remaining at 2.9% year-over-year and core CPI decreasing to 3.2%. This is the first decline in core inflation since July and reinforces expectations of a less aggressive US Federal Reserve in 2025.
21Shares crypto research strategist Matt Mena commented, “With inflation continuing to cool, the environment appears favorable for Bitcoin leading up to Donald Trump’s inauguration.”
Market Volatility Expected Around Inauguration
Despite the positive outlook, market observers caution about potential volatility surrounding Trump’s inauguration. QCP Capital analysts warned, “Volatility will likely occur as markets process and react to a new term under Trump,” adding that Bitcoin remains susceptible to downside risks, as the $90,000 level has been tested multiple times recently.
Bitcoin Futures Signal Growing Optimism
Technically, Bitcoin perpetual futures funding rates have risen, suggesting increasing market optimism. Coinglass data shows the open interest-weighted funding rate for Bitcoin perpetual futures climbed to 0.01% during the latest eight-hour contract cycle across major exchanges. This indicates traders are increasingly willing to pay a premium for long positions, reflecting growing confidence in Bitcoin’s price appreciation.
Bitcoin’s Correlation with Traditional Markets
Bitcoin’s recent rally is intertwined with broader economic trends. For instance, the S&P 500 (^GSPC) is approaching a crucial resistance level near 5,950, further contributing to the bullish sentiment in risk assets.
Jag Kooner, Bitfinex head of derivatives, noted, “Bitcoin’s correlation with the Nasdaq 100 (^IXIC) is at a two-year high, making it highly sensitive to CPI data and broader macroeconomic shifts. As crypto integrates further with traditional finance, it acts as a faster beta to changes in the macroeconomic landscape.”
Short Liquidations Add Fuel to the Rally
Short liquidations have also amplified Bitcoin’s recent surge. Coinglass data reveals that of the $85 million in liquidated Bitcoin positions over the past day, over $57 million were short liquidations. This suggests that traders betting against Bitcoin’s price were forced to close their positions, further driving up the price.
