BTC once fell below 90,000. How will the market go after the United States completes the highest power handover?

Jessy, Golden Finance

Around 22:00 on the evening of January 13th Beijing time, Bitcoin fell below 90,000. According to OKX exchange market data, the lowest point was $89,111. According to Coinglass data, as of 10:00 am on January 14th, the total liquidation volume of the past 24 hours was $803 million, of which long positions were liquidated for $581 million and short positions were liquidated for $221 million. As of press time, Bitcoin rebounded and broke through $97,000.

From January 7th to January 13th, the market has been mainly bearish, and Bitcoin has fallen from around $102,000 to around $89,000, a decrease of about 12%. Even worse are altcoins, especially some newly listed ones, such as Swarms and Usual, which have fallen by two-thirds from their recent highs.

While the cryptocurrency market is plummeting, the performance of the U.S. stock market is also disappointing. On the evening of January 13th, Beijing time, the three major U.S. stock indexes opened lower.

The macroeconomic data for the last month of 2024 has been gradually disclosed in recent days. January is also the last month of the Biden administration, and the United States is facing a power transition between the new and old governments. Therefore, the financial market is generally relatively volatile at this time.

On January 20th, when Trump takes office, will the cryptocurrency market stabilize and rise?

The unexpected rate cut by the Federal Reserve led to a continuous week-long decline in Bitcoin

Recently, the key factor affecting the cryptocurrency market's continuous decline is the release of relevant macroeconomic data in December 2024 in the United States.

In terms of employment data, first, on January 7th, the US November JOLTs job vacancies were announced at 8.098 million, which is higher than the expected 7.7 million. After this news was announced, Bitcoin began to fall again after rising above $100,000.

In the following days, more related employment data were released, such as the December ADP (ADP report statistics on private sector employment) employment of 122,000, lower than the expected 140,000, the previous value was 146,000, the lowest level since August 2024. Non-farm employment in December 2024 increased by 256,000, far exceeding the expected 160,000 and higher than the 212,000 in November. The unemployment rate for December in the United States fell slightly from 4.2% in November to 4.1%, which is 0.1 percentage point lower than expected. On the other hand, non-farm labor wage growth in December was slightly lower than expected. The average hourly wage increased by 0.3% month-on-month, which is in line with expectations, and increased by 3.9% year-on-year, slightly lower than expected.

Overall, the above employment data show that the overall employment situation in the United States is improving, indicating a positive trend in the economy. This has led to a decrease in market expectations for a rate cut by the Federal Reserve this year.

The CPI data for December 2024 will be released in the evening of January 15th. Currently, the market expects the month-on-month growth rate of CPI in December to remain at 0.3%, and the year-on-year growth rate to rise from the previous value of 2.7% to 2.9%, the highest level in 5 months. The core CPI inflation, which excludes significant factors such as energy and food, is expected to remain at 3.3% year-on-year, and the month-on-month growth rate is expected to slow to 0.2%.

And if as expected CPI continues to rebound slightly, it will make the Fed's rate cut policy more cautious.

The sharp decline in the cryptocurrency market on the 13th, as well as the consecutive downward trend, is a reaction based on the current macroeconomic situation in the United States.

Moreover, US Treasury yields have been rising steadily, with the benchmark 10-year US Treasury yield closing at 4.772% last Friday, the highest level since November 2023. This has led many investors to sell off high-risk assets and instead invest in relatively safe bond markets.

And the current US dollar index continues to rise, reaching 110, and the strength of the US dollar is often seen as a signal of relative strength in the US economy, which may also imply some uncertainty in the global economy. In this case, investors' risk appetite will generally decrease. At the same time, the strength of the US dollar increases the attractiveness of US dollar assets, and investors, in pursuit of higher returns and asset security, may transfer funds from risky assets such as cryptocurrencies to US dollar assets.

Therefore, the release of the above macroeconomic data has led to the market's belief that the Fed's next rate cut will be less than expected, which is the fundamental cause of market panic, and the higher risk aversion has led people to sell off crypto assets.

On the other hand, it is quite normal for the financial market to experience significant volatility in the face of the handover of power between the new and old governments.

And in January 2025, the last month of the Biden administration, in such a political context, how credible are the economic data it releases?

After a rapid decline on the 13th, the market quickly rebounded. As of the time of writing, Bitcoin has rebounded to over $97,000.

Short-term outlook on the market focuses on the cryptographic policies related to Trump's inauguration, while the long-term outlook still focuses on the macro economy

Currently, with the inauguration of Trump, it is generally believed within the industry that his formal inauguration will uplift the cryptocurrency market, especially if he makes cryptocurrency-related remarks on the day of his inauguration, which will greatly inspire market sentiment. This is because Trump has promised to make the United States the global capital of cryptocurrency and support the establishment of a strategic Bitcoin reserve, and so on.

According to The Washington Post, David Sacks and the Trump transition team are working closely with leaders in the cryptocurrency industry to develop a legislative strategy. Trump is expected to sign an executive order on his first day in office, which may involve "de-banking" and overturning the controversial cryptocurrency accounting policy requiring banks to include digital assets they hold on their balance sheets.

As Trump's promised policies are gradually implemented, it will undoubtedly boost market confidence and attract capital inflows into the cryptocurrency market.

There is also an opinion that if Trump's previous campaign promises were hindered by practical reasons and could not be fully implemented, or even if he did not mention cryptocurrencies on the day of his inauguration, it would undermine investor confidence and cause a short-term decline in cryptocurrency prices.

Overall, the Trump administration has been crypto-friendly, and its policies related to virtual currencies during its tenure are definitely favorable, which is generally good for the development of the crypto industry.

Another factor that will affect the cryptocurrency market is undoubtedly macroeconomic factors, which are currently the most uncertain. And after Trump took office, the economic policies he introduced may also increase global economic uncertainty.

When Trump was running for election, he advocated bringing manufacturing back to the United States, and in order to achieve this goal, the dollar needs to weaken. This way, the prices of dollar-denominated goods will relatively decrease, thereby enhancing the competitiveness of export goods and increasing export volume. The weakening of the dollar will increase the attractiveness of cryptocurrencies as an alternative asset.

On the other hand, Trump is also likely to implement trade protectionism by imposing tariffs on imported goods to protect domestic industries in the United States. However, this trade protectionist tendency may lead to trade frictions, which will create great uncertainty for the global economic and trade order. The unstable global political and economic situation will also have a negative impact on cryptocurrencies.

On the other hand, according to the recent macroeconomic data released by the United States, many institutions have lowered their forecasts for further interest rate cuts in the United States, but what will be the actual interest rate cuts in the United States in 2025? There is also a great deal of uncertainty.

First of all, the realization of the promises made by Trump himself during the campaign, such as tax cuts, lower interest rates, and some trade protection measures, as well as adjustments to immigration policies, will likely require interest rate cuts to be implemented. On the other hand, with the introduction of Trump's set of policies, the intention is to promote the development of the U.S. economy, which has also led to further inflation. In order to control inflation, the Federal Reserve may choose to maintain interest rates or even raise them.

However, the Federal Reserve may maintain interest rates unchanged or even raise them to control inflation, but these are all later issues. At present, the more certain thing within one or two months is that after Trump takes office, he will vigorously stimulate the development of the U.S. economy, which requires loose monetary policy to cooperate.

If Trump fulfills his promises to the cryptocurrency market when he takes office, the author is optimistic about the cryptocurrency market within at least one month after Trump takes office.