Bitcoin fell to a low of $92,508 on January 8 after hitting $102,357 on Monday, a nearly 10% decline in a matter of days. The immediate catalyst appears to be the piercing rise in U.S. Treasury yields on January 7, with the 10-year bond rate reaching 4.67% following an unexpectedly powerful ISM Paid Price Index and higher-than-expected JOLTS job vacancies.

Why Trump’s inauguration is bullish for Bitcoin

While this data has renewed concerns that inflation could persist, many veteran observers say Trump’s upcoming inauguration is a reason to remain bullish on Bitcoin and cryptocurrencies. Analysts at LondonCryptoClub (@LDNCryptoClub) say that “everyone is overestimating both the likelihood of tariffs and at least their magnitude,” pointing out that when Trump was previously in office, there was “no material impact on inflation” despite high-profile tariff announcements.

According to the analyst, market participants risk overlooking the fact that “the United States needs to refinance more than $7 trillion of debt this year,” which could force the Fed to keep interest rates lower and ultimately end quantitative tightening. Raoul Pal, founder of Global Macro Investor, echoed this sentiment, saying, “I tend to agree with this position.”

I tend to agree with this approach https://t.co/SzmHbyXoBc

— Raoul Pal (@RaoulGMI) January 8, 2025

Supporters of the pro-Bitcoin thesis point out that any tariffs introduced under the novel Trump administration may be politically gigantic but practically modest, supporting LondonCryptoClub’s view that “Trump works as a negotiating tactic and likely delivers much less.” Another critical point is the emerging liquidity scenario, 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 short-lived respite offered by the debt ceiling. The same argument extends to a renewed wave of “China-led global disinflation,” which could force the United States to cut interest rates if economic growth shows signs of stalling.

Chris Burniske, partner at Placeholder VC, once said supposed the market would have rallied directly at the launch and then sold off, but now he predicts a different scenario: “I agree with this – in the 4th quarter I thought we would accelerate the launch and then sell it, but when it turned out to be too consensus, + DXY and the increase in rates , looks like we’re going into pain first, then Valhalla – I prefer this setup TBD”

Some analysts see immediate benefits if Trump begins publicly discussing cryptocurrencies again, given how it could raise Bitcoin’s prestige. Crypto analyst Gammichan reminded followers that “we have a president who will regularly mention Bitcoin” and emphasized that a powerful dollar could be “the fuel that will pump us up when it falls.”

Gammichan also stressed that “3-5% inflation is great for BTC,” and noted that while the Fed may keep rates high for now, it could “squeeze them out at any time” as the government’s own interest spending remains uncomfortably high and the debt is trillions of dollars to manage. This prospect is further reinforced by talk that other global players, especially China, may continue to stimulate their economies, thereby increasing overall liquidity.

I think we forgot about this:
– We have a president who will regularly mention Bitcoin
-MSTR is on NASDAQ
-The Fed is in a great position and has room to juice it at any time
-3-5% inflation is excellent for BTC
-Sturdy DXY means fuel that will pump us when it drops
-The Fed needs to get…

— Gammichan (@gammichan) January 8, 2025

Felix Jauvin, host of the Forward Guidance podcast, underlined a broader shift in market psychology by stating, “We are rapidly moving from ‘selling the news’ to ‘buying the news’ on Inauguration Day.”

Despite this generally confident narrative, near-term challenges remain. Recent economic data in the United States surprised on the upside, raising concerns that the Federal Reserve may tighten policy for longer. Some investors see the next few weeks as a tug of war between rising yields and the prospect of a renewed easing of global monetary policy.

Still, LondonCryptoClub argues that the spike in yields may be a short-lived hoax and that once the Fed recognizes how much refinancing needs to happen, it will be forced to “help keep interest rates low” and eventually return to “some form of ‘non-QE’ QE” if the market repo shows signs of strain. Those who believe in the “buy the news” thesis predict that as soon as the Fed reopens the liquidity taps, Bitcoin’s price will likely rebound from its current decline and likely remain higher throughout 2025.

Market watchers will also remember how during Trump’s earlier presidency, the U.S. dollar initially gained but quickly peaked. LondonCryptoClub noted that “the market reacted this way last time Trump was elected and the dollar quickly peaked,” suggesting that a similar scenario could happen again, with the dollar briefly strengthening before weakening.

Combined with the possibility of coordinated stimulus from major central banks, any lasting reversal in the dollar would likely spell good news for Bitcoin and the broader cryptocurrency market.

At the time of publication, the BTC price was $93,596.

Featured image created with DALL.E, chart from TradingView.com