BTC once fell below 90,000. How will the market trend after the US completed the transfer of supreme power?

Around 22:00 on 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 a.m. on January 14th, the total liquidation volume in the past 24 hours was $803 million, of which $581 million was liquidated on long orders and $221 million was liquidated on short orders. As of press time, Bitcoin rebounded above $97,000.

From January 7 to January 13, the market was mainly negative, with Bitcoin falling from $102,000 to around $89,000, a drop of about 12%. Even worse were the altcoins, especially some newly launched altcoins, while Swarms and Usual fell 2/3 from their recent highs.

As the cryptocurrency market plummeted, the performance of U.S. stocks was also unsatisfactory. On the evening of January 13th, Beijing time, the three major U.S. stock indexes opened lower collectively.

Macroeconomic data for the last month of 2024 have also been disclosed in recent days. January is also the last month of the Biden administration, and the United States is facing a handover of power between the old and new governments. Therefore, financial markets are generally relatively turbulent at this time.

On January 20, Trump will take office. Will the crypto market stabilize and rise?

The Fed's rate cut may be less than expected, causing Bitcoin to fall for a week

Recently, the core factor affecting the continuous decline of the crypto market is the release of relevant US macroeconomic data in December 2024.

In terms of employment data, the first was the announcement on January 7 that the number of JOLTs job vacancies in the United States in November was 8.098 million, which was higher than the expected 7.7 million. After the news was announced, Bitcoin began to fall after reaching $100,000 again.

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

Overall, the above employment data show that the employment situation in the United States is relatively improving, which also indicates that the economy is improving, which has further reduced market expectations for the Federal Reserve to cut interest rates this year.

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

If the CPI continues to rebound slightly as expected, the Fed will be more cautious in its interest rate cut policy.

The sharp drop in the crypto market on the 13th and its continued decline were a reaction to the current macroeconomic situation in the United States.

Moreover, U.S. bond yields are also rising. The benchmark 10-year U.S. Treasury bond yield closed at 4.772% last Friday, the highest level since November 2023. This has also caused many investors to sell high-risk assets and turn to the relatively safe bond market.

At present, the US dollar index has continued to rise, reaching 110. The strengthening of the US dollar is often seen as a signal of the relative strength of the US economy, and it may also imply that there is a certain degree of uncertainty in the global economy. In this case, investors' risk appetite will generally decrease. At the same time, the strengthening of the US dollar has increased the attractiveness of US dollar assets. In order to pursue higher returns and asset security, investors will transfer funds from risky assets such as cryptocurrencies to US dollar assets.

Therefore, the release of the above macro data has led to the market's judgment that the Fed's next interest rate cut will be lower than expected. This is the root cause of the market's panic, and the higher risk aversion sentiment has led people to sell crypto assets.

But on the other hand, facing the handover between the old and new governments, it is very normal for financial markets to experience large fluctuations.

January 2025 is the last month of the Biden administration. Against such a political backdrop, how credible are the economic data it releases?

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

In the short term, the market will focus on the relevant crypto policies after Trump takes office, and in the long term, it will still focus on the macro economy.

At present, with Trump taking office, the industry generally believes that his official inauguration will boost the crypto market, especially if he makes crypto-related remarks on the day of his inauguration, which will greatly stimulate the crypto market sentiment. Because Trump has promised to make the United States the global capital of cryptocurrency and support the establishment of a strategic Bitcoin reserve, etc.

According to The Washington Post, David Sacks and the Trump transition team are working closely with crypto industry leaders 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 the abolition of controversial crypto accounting policies that require banks to include their digital assets on their balance sheets.

As the policies promised by Trump are gradually implemented, it will undoubtedly boost market confidence and cause funds to flow into the crypto market.

There is also a view that if some of Trump’s promises made during his previous campaign cannot be fully implemented due to practical reasons, or even if he does not mention cryptocurrencies on his inauguration day, this will hit investor confidence and lead to a short-term drop in cryptocurrency prices.

But overall, the Trump administration has always been a crypto-friendly government, and the virtual currency-related policies it issued during its tenure were definitely relatively friendly, and overall beneficial to the development of the crypto industry.

Another factor that will affect the cryptocurrency market is undoubtedly the macroeconomic factor, which is also the most uncertain factor at present. After Trump took office, the relevant economic policies he introduced may also make the global economy more uncertain.

When Trump was running for office, he advocated bringing manufacturing back to the United States. To achieve this goal, the dollar needs to weaken. This will reduce the price of goods denominated in dollars, thereby increasing the competitiveness of export goods and increasing export volume. The weakening of the dollar will increase the attractiveness of crypto assets as an alternative asset.

On the other hand, Trump is also likely to promote trade protectionism, impose tariffs on imported goods and protect domestic industries in the United States. This trade protection tendency may trigger trade frictions, which makes the global economic and trade order face great uncertainty. The unstable global political and economic situation will be bearish for cryptocurrencies.

On the other hand, based on the macroeconomic data recently released by the United States, many institutions have lowered their forecasts for further interest rate cuts in the United States, but what will the actual interest rate cuts be like in 2025? There is also great uncertainty.

First of all, in order to fulfill Trump's campaign promises of tax cuts, lower borrowing rates, and some trade protection measures and immigration policy adjustments, all of these will most likely require interest rate cuts. But on the other hand, with the introduction of a set of Trump policies, he is actually trying every means to promote the development of the US economy, which has also brought about a further increase in inflation. In this regard, in order to control inflation, the Federal Reserve may choose to maintain interest rates unchanged or even raise interest rates.

However, the Federal Reserve may maintain interest rates unchanged or even raise them in order to control inflation. This is a matter for the future. What is more certain in the next one or two months is that after Trump takes office, he will vigorously stimulate the development of the US economy, which requires the coordination of loose monetary policy.

If Trump fulfills more of the promises he made to the crypto market when he took office, I am optimistic about the crypto market for at least the first month after Trump takes office.