Bitcoin (BTC) is up 3.3% this week, trading at
$97,335, after recovering from a sharp 5% decline on Monday when it dipped to $89,158,
its lowest level since November 18. The broader crypto market faced downward
pressure earlier in the week following the release of a strong U.S. labour
market report for December, which dampened hopes for imminent Federal Reserve
interest rate cuts.
Market bets on a quarter-point rate cut in
January have dropped to 2.7%, with March expectations reduced to 19.7%. Crypto
assets, heavily reliant on monetary easing to fuel rallies, remain sensitive to
the Fed’s hawkish stance. The strong labour report pushed Bitcoin to test
support at $89,000-$91,000, with a potential breakdown threatening a decline to
$80,000.
However, speculative news about a gradual
tariff increase by the Trump administration, rather than abrupt hikes, helped
stabilise the market. This coincides with preparations for Donald Trump’s
inauguration, where crypto-focused policies could play a role. Investors are
also keeping an eye on upcoming macroeconomic data, such as the U.S. Consumer
Price Index (CPI). Lower-than-expected CPI data could provide further support
for Bitcoin, enabling it to hover around current levels into January 20.
Historically, January is a weak month for Bitcoin, with average gains at 0.0%,
though BTC has already gained 3.3% this month.
Meanwhile, large investors have scaled back
long positions. Last week, spot BTC-ETF outflows amounted to $130 million from
funds like BlackRock's IBIT, Fidelity's FBTC, and Grayscale's GBTC. This week,
flows are neutral but could turn negative, signalling a possible market
cooldown.
The crypto community is now awaiting Donald
Trump’s first actions as U.S. President. Should his administration prioritise a
Strategic Bitcoin Reserve, Bitcoin could target $150,000-$200,000 by mid-2025.
Conversely, a lack of crypto-focused decrees could see BTC fall back below $90,000,
potentially presenting a favourable buying opportunity.