Bitcoin retreats after 33% surge since Trump’s US election win

Bitcoin has been on a tear, surging more than 33% since Donald Trump won the US presidential election on 5 November. On Tuesday, the world’s largest digital token briefly topped $90,000 (€85,000), after breaking through the $80,000 mark over the weekend.

However, its price pulled back to below $87,000 (€82,000) during the Asian session on Wednesday, alongside selloffs across global equity markets.

Some analysts suggest that near-term profit-taking could limit the upside potential for risk assets. Wall Street experienced a broad-based selloff on Tuesday after repeatedly hitting new all-time highs, while major Asian stock market benchmarks also fell on Wednesday ahead of the US inflation data. The US Consumer Price Index (CPI) is expected to remain above the Federal Reserve’s target level in October, which could slow the pace of rate cuts and potentially trigger further corrections in the Trump-led rally.

Bitcoin faces short-term liquidation risks

Bitcoin is notorious for its extreme volatility, primarily driven by speculation rather than solid fundamentals. The cryptocurrency market’s liquidity is limited, meaning that large trades by major holders, or “whales,” can significantly impact prices, especially on smaller exchanges or during periods of lower trading activity.

According to Binance data, crypto markets saw volume similar to Election Day on Tuesday when Bitcoin briefly topped $90,000 (€85,000), while the price moved within a narrow range, indicating the potential for a large liquidation. There are growing bets that Bitcoin will reach a six-figure price of $100,000 (€94,000) before the year’s end. However, markets do not always move in a single direction, and an unwinding of the Trump Trade could trigger further retreats in assets that have benefited from his victory.

Dilin Wu, a market research analyst at Pepperstone, stated in an email: “Trump’s proposals will remain uncertain until control of the House and any internal party opposition are clarified,” adding that his policies could result in larger trade deficits and high inflation, negatively impacting the US economy in the long term, which would “ultimately weigh on risk assets like Bitcoin.”

Is $100,000 achievable?

Bitcoin rallied before and after the US election amid the prevailing Trump Trade, as investors accumulated Bitcoin-related assets, anticipating that US cryptocurrency regulations would be more favourable under a Trump administration than under President Joe Biden. The former US president has been notably pro-cryptocurrency, pledging at the Bitcoin 2024 conference to make the United States “the crypto capital of the planet” and position Bitcoin as a global superpower.

Not only the Trump Trade, but also the growing acceptance of the digital token has been favourable for Bitcoin bulls this year, especially after the US Securities and Exchange Commission (SEC) approved the spot Bitcoin ETF in February.

Josh Gilbert, a market analyst at eToro, wrote in a note on 11 November: “Though Bitcoin is sitting at record highs, it really feels like this rally could just be getting started. This bull market has a lot of weight behind it, and that could keep driving the asset higher.” He expects that Bitcoin’s price “could potentially reach six figures within a few months.”