While bitcoin swiftly hit new all-time highs after Donald Trump won the U.S. presidential election in November, macro headwinds have weighed on the market since mid-December, causing K33 analysts to question their prior expectation of his inauguration being a sell-the-news event.
K33 previously favored selling bitcoin at the Jan. 20 inauguration as heightened expectations of Trump’s pro-crypto campaign promises meet the reality of Washington’s often slow-paced political machine.
However, selling the news has become less attractive as the inauguration approaches, with the market attempting to weigh up the inflationary effect of Trump’s tariff rhetoric against potential tax cuts and favorable crypto policies that are expected to boost risk assets this year, K33 analysts Vetle Lunde and David Zimmerman wrote in a Tuesday report for clients.
Bitcoin peaked at just over $108,000 on Dec. 17 but subsequently fell nearly 18% to a low of around $89,000 on Monday as soaring 10-year yields, a strengthening dollar and reduced Federal Reserve rate cut expectations amid higher inflation projections took their toll on the foremost cryptocurrency and global markets.
Bitcoin recovered somewhat on Tuesday and is currently trading for $96,793, according to The Block’s Bitcoin Price Page.
“November’s enthusiasm has come and gone as the S&P 500 closed its post-election gap while bitcoin hit two-month lows,” the K33 analysts said. “Our monthly outlook favored selling the inauguration, but we rephrase this strategy as selling bitcoin at the inauguration is considerably less appealing unless the coming days offer a resurfacing of momentum.”
Comparing the post-election reaction ahead of Trump’s two terms, the S&P 500 initially mirrored the market’s response in 2016. Back then, the index stabilized at mid-December highs and experienced low volatility until the inauguration, the analysts noted.
However, following the Federal Open Market Committee’s meeting on Dec. 18, the pattern has significantly diverged.
“The market jumped the gun with Trump enthusiasm in November until mid-December, but conservatism and caution have since prevailed,” they said.
Trump election performance comparisons. Image: K33.
During his first term, Trump frequently highlighted stock market performance to emphasize economic growth linked to policies such as tax cuts, deregulation and trade deals — a narrative the analysts expect to resurface throughout his second term.
“We hold bullish long-term expectations for Trump’s impact on bitcoin,” the analysts said.
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