Can Trump’s inauguation solve the U.S.’s inflation problems?

For weeks, Bitcoin has traded within the $90,000 to $100,000 range, teasing investors and analysts alike. This range isn’t just a number; it’s a psychological benchmark that has financial markets buzzing. Breaking through $100,000 could unlock a flood of speculative interest, pushing the cryptocurrency into uncharted territory. But there’s more at play than just round numbers; this year, we’re witnessing a blend of politics, inflation, and the crypto market.

One major driver of Bitcoin’s momentum has been its growing correlation with US tech stocks. Data from Bloomberg reveals a 30-day correlation coefficient of 0.70 between Bitcoin and the Nasdaq 100 Index. For perspective, a coefficient of 1 indicates perfect alignment, while -1 suggests complete opposition. In essence, Bitcoin and tech stocks are moving in near lockstep, with inflation reports and Federal Reserve signals influencing both markets.

This week’s US inflation data provided a softer-than-expected reading, with year-over-year prices increasing by 2.9% and core inflation rising just 0.2% month-over-month. These figures were enough to buoy both traditional markets and digital assets. The S&P 500 and Nasdaq 100 surged over 1% after the report, lifting Bitcoin alongside them.

The softer inflation print eased concerns about the Federal Reserve’s potential for further interest rate hikes. Lower rates are historically favorable for risk-on assets like cryptocurrencies, as they reduce borrowing costs and increase liquidity.

The political sphere is also adding fuel to Bitcoin’s volatility. President Donald Trump’s inauguration on January 20 has become a focal point for traders. Speculation is rife about the potential impact of his administration’s policies on inflation, trade, and cryptocurrencies. Trump’s pledge to make the US the global hub for crypto has sparked optimism, but concerns about tariff and immigration policies adding to inflationary pressures temper that enthusiasm.

Analysts at K33 Research highlighted the importance of this week’s CPI report, noting, “The overall sensitivity to interest rates over the past month suggests increased importance of Wednesday’s CPI print. Additionally, notable Trump momentum may still form in the days leading into the inauguration.”

As Bitcoin flirts with the $100,000 threshold, the options market signals that traders are positioning for heightened volatility. Data from trading platform Derive.xyz indicates a rise in bearish bets as investors hedge against potential downside risks. “The proportion of bearish bets has climbed, pointing to hedging against potential downside risks as we approach the inauguration,” said Sean Dawson, Head of Research at Derive.xyz.

The path to $100,000 remains fraught with uncertainty, but the drivers propelling Bitcoin upward—macroeconomic trends, tech stock correlations, and political developments—could align for a breakthrough. The upcoming inauguration could serve as a catalyst, either propelling Bitcoin past its psychological barrier or introducing turbulence into an already volatile market.

As we approach these critical junctures, one thing remains clear: Bitcoin is no longer an isolated asset. Its fate is increasingly intertwined with broader financial and political dynamics, making it a fascinating—and nerve-wracking—asset to watch.

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