Bitcoin’s price initially surged after Donald Trump’s election victory in November, driven by expectations of pro-crypto policies under his administration. However, since mid-December, market enthusiasm has been dampened by macroeconomic pressures. After peaking at just over $108,000 on Dec. 17, Bitcoin dropped nearly 18%, hitting a low of $89,000 on Monday before recovering to $97,422 by Tuesday.

K33 analysts Vetle Lunde and David Zimmerman, who initially predicted that Trump’s Jan. 20 inauguration would be a “sell-the-news” event for Bitcoin, have now reconsidered. Their earlier expectation relied on a burst of optimism meeting the slower pace of political reality in Washington. However, the ongoing cooling of markets has made this strategy less compelling. “November’s enthusiasm has come and gone as the S&P 500 closed its post-election gap while Bitcoin hit two-month lows,” they wrote.

The analysts attribute this shift to competing market forces. Trump’s rhetoric on trade policies could add inflationary pressures, while anticipated tax cuts and favorable cryptocurrency regulations might bolster risk assets. These conflicting factors have left markets weighing the balance between potential gains and caution. “The market jumped the gun with Trump enthusiasm in November until mid-December, but conservatism and caution have since prevailed,” they noted.

Comparing current trends to Trump’s first term, K33 highlighted differences in market behavior. In 2016, the S&P 500 stabilized at December highs with minimal volatility leading to the inauguration. This time, however, volatility has persisted, exacerbated by the Federal Open Market Committee’s meeting on Dec. 18, rising 10-year Treasury yields, a strengthening U.S. dollar, and increased inflation projections.

Despite these short-term challenges, K33 remains optimistic about Bitcoin’s long-term prospects during Trump’s presidency. The report noted that Trump often emphasized stock market performance as a key indicator of economic success in his first term, citing policies like tax cuts, deregulation, and trade agreements. Analysts expect this focus to continue, with Bitcoin potentially benefiting from a similar narrative.

While K33’s monthly outlook originally favored selling Bitcoin at the inauguration, the analysts have revised their stance. They now see selling Bitcoin at the event as less appealing unless there is renewed market momentum in the coming days. Their report underscores optimism, caution, and political factors influencing Bitcoin’s trajectory.

As the inauguration approaches, the cryptocurrency market continues to reflect the tension between Trump’s pro-crypto promises and the practicalities of policy implementation, leaving investors watching closely for signs of renewed momentum.