Bitcoin (BTC-USD) crossed the $100,000 (£81,900) threshold three times before retreating slightly on Thursday. The rally comes amidst cooling US inflation data, as the December Consumer Price Index (CPI) report showed signs of easing pressures, and just days ahead of Donald Trump’s inauguration on 20 January.
Bitcoin briefly touched $100,000 but dipped to $99,500 on Thursday, according to Coingecko.
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Ethereum (ETH-USD) surpassed $3,300, Solana (SOL-USD) rose above $200, and XRP (XRP-USD) was a standout performer with an 8% daily increase and a 34% gain over the past week.
Speculation about the incoming president’s pro-crypto policies, including a proposed “strategic bitcoin reserve” for the US government, has fueled excitement among market participants. The policy would involve the government purchasing and holding significant amounts of bitcoin, akin to the strategic petroleum reserve. Advocates suggest this could spark a global crypto race, with other nations following suit.
“The Trump administration features crypto-friendly personnel, and rumours that Trump will enact wide-ranging pro-crypto executive orders have provided a short-term tailwind for bitcoin,” QCP Capital analysts said in a recent report.
The December CPI report revealed that inflation continues to cool, with headline CPI holding steady at 2.9% year-over-year and core CPI easing to 3.2%. This marks the first decline in the core inflation rate since July and has bolstered hopes for a dovish pivot by the US Federal Reserve in 2025.
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“With inflation continuing to cool, the stage is set for a favourable environment for bitcoin ahead of Donald Trump’s inauguration,” 21Shares crypto research strategist Matt Mena said.
However, market observers warn of heightened volatility in the days surrounding Trump’s inauguration. “The volatility will come as markets digest and adjust to a new term under Trump,” QCP Capital analysts noted. They cautioned that bitcoin remains vulnerable to downside risks, as the $90,000 level has been tested several times over the past week.
On the technical side, perpetual futures funding rates for bitcoin have increased, signalling growing market optimism. According to Coinglass, the open interest-weighted funding rate for bitcoin perpetual futures climbed to 0.01% during the latest eight-hour contract cycle across major exchanges.
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The increasing funding rate means traders are increasingly betting on bitcoin’s price going up, and they’re paying a small fee to keep their positions open, which reflects growing confidence in the market.
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Bitcoin’s rally is closely tied to broader economic trends. The S&P 500 (^GSPC), for example, is testing a critical resistance level near 5,950, adding to the bullish sentiment in risk assets.
“Bitcoin’s correlation with the Nasdaq 100 (^IXIC) is at a two-year high, making it highly reactive to CPI data and broader macroeconomic shifts,” Jag Kooner, Bitfinex head of derivatives, said. “As crypto becomes more intertwined with traditional finance, it acts as a faster beta to shifts in the macroeconomic landscape.”
Short liquidations have also surged during bitcoin’s recent rally. Coinglass data reveals that of the $85m in liquidated bitcoin positions over the past day, more than $57m were short liquidations.
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