Donald Trump is set to be inaugurated for his second term as President of the United States on 21 January 2025.
As always, he hasn’t hesitated to make bold statements, this time crediting himself for Bitcoin’s recent all-time high. Trump calls it the “Trump Effect,” claiming his leadership is driving confidence in financial markets, particularly cryptocurrencies.
But while Trump’s rhetoric grabs headlines, the timing of his inauguration is key. Next week, the Federal Reserve will announce its latest decision on interest rates—a moment that could steer markets just as much as the political drama in Washington.
Trump’s “Trump Effect” Claim
Donald Trump has never been one to shy away from claiming credit. Recently, he linked the cryptocurrency market’s growing momentum to his imminent return to power, labelling it the “Trump Effect.”
Trump argues that his leadership and pro-business stance have reinvigorated confidence in markets, including Bitcoin.
He has also promised to position the United States as a global hub for cryptocurrencies, raising hopes for a more accommodating regulatory environment under his administration.
Throughout his campaign, Trump emphasised plans to simplify crypto regulations and support digital innovation. His rhetoric has energised parts of the industry, with some leaders praising the potential shift in US policy.
However, scepticism remains. Many point out that Bitcoin’s value is influenced by a web of factors far beyond Trump’s policies, including global economic trends, institutional interest, and broader market developments.
As the inauguration approaches, excitement over Trump’s promises is tempered by political unease.
The United States remains deeply divided, and any disruption during the ceremony could impact market sentiment. For Bitcoin, which thrives on speculation but is highly sensitive to uncertainty, this creates a tense and unpredictable environment.
Trump’s bold claims about his influence on Bitcoin reflect his broader strategy to frame himself as a catalyst for economic growth. But whether the so-called “Trump Effect” will translate into sustained benefits for the crypto industry remains to be seen.
For now, his return to power adds another layer of intrigue to an already volatile market, leaving investors and analysts watching closely for the first steps of his new administration.
Current Market Reactions
Bitcoin is currently hovering around $101,000, a key price point that could define its next move. In the weeks leading up to the inauguration, the market has shown signs of hesitation.
Many investors are taking a cautious approach, waiting to see how events unfold before making large trades.
There’s also been a noticeable trend of profit-taking. Some investors are cashing out after Bitcoin’s strong rally in recent months, creating short-term selling pressure.
Despite this, institutional demand remains steady. Bitcoin Spot ETFs have seen $1.86 billion in inflows over the past three weeks, reflecting confidence from major players.
Still, Bitcoin’s outlook is far from clear. Much will depend on how smoothly the inauguration proceeds and whether Trump’s claims can hold up against broader economic realities.
While Trump’s inauguration dominates the news, next week’s Federal Reserve interest rate decision might prove just as influential for markets. Expectations are for the Fed to keep rates unchanged, offering some relief to risk assets like Bitcoin.
Source: Trading Economics
Low or steady rates tend to encourage investment in assets with higher returns, which has been a tailwind for Bitcoin in the past. But even if rates don’t budge, the Fed’s statement on future policy will be critical. If it signals concerns about inflation or hints at possible rate hikes later in the year, it could dampen investor sentiment.
For Bitcoin, the stakes are high, but the overall crypto market has benefited from growing institutional interest and a favourable macroeconomic environment.
Any unexpected moves or cautious commentary from the Fed could disrupt this momentum. Conversely, if the decision aligns with expectations and signals stability, it could pave the way for Bitcoin to build on its recent gains.
Conclusion
Trump’s inauguration and the Federal Reserve’s upcoming rate decision are setting the stage for a potentially volatile week in markets. While Trump’s claims about the “Trump Effect” may excite crypto enthusiasts, Bitcoin’s trajectory depends on more than just political rhetoric.
With Bitcoin sitting at $101,000, investors face a delicate balance between optimism and caution. Whether the next few weeks bring new highs or a period of correction, one thing is certain: it’s a time to stay vigilant and prepared for anything.