Some analysts predict that Bitcoin's current pullback is likely temporary, as supportive factors remain robust. Recently, Bitcoin's rally paused, with traders assessing U.S. President-elect Trump's verbal support for cryptocurrencies and its impact on the market. Following Trump's election victory, Bitcoin surged by approximately 30%, reaching a record high of $89,968 before retreating to around $86,000.
Trump has vowed to create a favorable regulatory framework for cryptocurrencies, establish a strategic Bitcoin reserve, and position the U.S. as a global hub for the industry. Initially skeptical, Trump's stance shifted after considerable investment by digital asset companies during his campaign, fueling optimism in the crypto sector and pushing market value to historic peaks. However, there is uncertainty about whether Trump's administration will prioritize economic issues over digital asset legislation.
IG Australia's market analyst, Tony Sycamore, noted that while further Bitcoin gains are possible, much of the good news is already factored in. Meanwhile, one of the strongest performers in the crypto market recently has been Dogecoin (DOGE), gaining about 80% over five days, partly fueled by billionaire Elon Musk's endorsements. Musk, now a co-head of a new government efficiency department, boosted Dogecoin briefly after its formation was announced, but it later followed Bitcoin's downward trend.
Globally, attention is on upcoming U.S. inflation data, which could influence perspectives on further Federal Reserve rate cuts. Rising U.S. Treasury yields and a strengthening dollar suggest investors expect inflation pressures from Trump's proposed trade tariffs and tax cuts. Consequently, U.S. stocks have dropped, as higher borrowing costs could hinder investments in risk assets like cryptocurrencies.
Noelle Acheson, author of "Crypto Is Macro Now," emphasized that the crypto market's moderate leverage reduces the risk of a severe pullback, suggesting that while a market pause is welcome, it is likely only temporary given the strong favorable factors. Deribit data shows bullish options bets on Bitcoin reaching $100,000, with over $1 billion inflows into U.S. Bitcoin ETFs earlier this week.
