(Bloomberg) — Bitcoin rebounded from its biggest two-day decline since the U.S. election in choppy trading that reflects mixed assessments of the impact of newly elected President Donald Trump’s policy agenda.
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The digital asset fell nearly 3% on Saturday and Sunday before rising to a high of $92,215 on Monday. Some of these gains were cut to about $90,675 at 10:29 a.m. in New York. Trump has made several pro-crypto pledges, but there are open questions about the timeline for implementation and whether they are all feasible – such as setting up a US Bitcoin stockpile.
Bitcoin became “overheated” after record-breaking advances since Election Day on November 5, and “there is a lot of good news built into the price,” IG Australia Pty Market Analyst Tony Sycamore wrote in a note.
Inflation risks
While Trump’s business-friendly stance has boosted both US stock and crypto investors, some of the optimism is tempered by inflation risks from the prospect of trade tariffs and budget deficits to finance tax cuts.
Investors are lowering expectations for Federal Reserve rate cuts in a solid US economy, a potential hurdle for crypto as liquidity conditions could impact speculative demand for digital tokens.
The correlation between Bitcoin and gold decoupled immediately after election night, a group of Citigroup analysts wrote in a note on Monday, and is unlikely to return as long as risk sentiment supports crypto and macroeconomic headwinds for gold persist. “We have long argued that Bitcoin’s ‘digital gold’ moniker was not yet appropriate, especially when it comes to portfolio allocation,” they said. “Gold still has the distinct advantage of being a store of value, despite both assets having limited supply and no coupons.”
Trump has promised to create a friendly regulatory framework for digital assets, establish a strategic Bitcoin stockpile and make the US the global center of the industry. The president-elect, once a crypto skeptic, changed course after digital asset companies spent heavily to advance their interests during their election campaigns.
“Equities remain the key macro driver of crypto,” Citigroup analysts said, noting that the correlation between digital assets and stocks is likely to remain high until Trump’s economic policies become clearer. “The correlation between crypto and USD turned positive on November 8, which has been quite rare in recent years, although it typically does not last very long,” they said.