The recent market downturn in both stocks and cryptocurrencies may reduce the chances of a “sell-the-news” reaction following Donald Trump’s inauguration, according to K33 Research.
Bitcoin (BTC) saw a strong rebound on Tuesday, climbing to $97,300 after briefly dipping below $90,000 on Monday. This surge was fueled by news that Trump’s incoming administration is preparing pro-crypto executive orders, alongside softer-than-expected U.S. Producer Price Index (PPI) data for December.
At the time of writing, BTC was trading at $96,500, marking a 3% gain in the past 24 hours. The broader CoinDesk 20 Index also saw a 5% gain, with XRP and dogecoin (DOGE) leading altcoins with 6%-7% increases.
Meanwhile, traditional equity markets were subdued, with the S&P 500 and Nasdaq ending the day flat as traders digested the latest economic reports.
Bitcoin continues to consolidate above $90,000, as investors weigh the impact of rising U.S. Treasury yields and a stronger dollar. Recent economic data has lowered expectations for substantial Federal Reserve rate cuts this year, adding to the volatility in risk assets.
The focus is now on Wednesday’s Consumer Price Index (CPI) report, which could provide further insights into inflation and the Fed’s policy trajectory, potentially sparking further market movements.
As Trump’s Jan. 20 inauguration draws nearer, there is growing anticipation regarding potential pro-crypto measures that could influence market sentiment.
K33 Research initially expected the inauguration to trigger a “sell-the-news” event due to the heightened expectations, but with the recent market pullback, the firm has revised its view.
“Although we initially anticipated de-risking ahead of the inauguration, the recent market downturn has made this strategy less attractive unless we see a significant recovery in the coming days,” K33 noted in their latest report.
“The S&P 500 erased its post-election gains, and bitcoin reached its lowest levels in two months,” the analysts wrote. “Any de-risking strategies will now depend on near-term price action, but we remain bullish on the long-term outlook for bitcoin, especially with the potential for Trump’s pro-crypto policies to drive growth.”
