Inflation Pressures Ease. Is Bitcoin Ready for 'Phase 2' of Bull Run?

Adding to the momentum, Reuters reported that the SEC is expected to quickly initiate reforms in the crypto industry immediately following Donald Trump's inauguration. This anticipation is backed by sources indicating that top Republican U.S. Securities and Exchange Commission officials are ready to revamp the agency's cryptocurrency policies soon after Trump takes office.

The coming weeks are crucial for Bitcoin; here are the potential catalysts:

The market is keenly anticipating this Federal Open Market Committee meeting scheduled for this month. It is the key factor that could dictate the short-term trend. Markus Thielen, research director at 10x Research, suggests this meeting could trigger a significant breakout in Bitcoin prices. Current chart analysis shows a "contracting triangle," indicating impending fluctuations.

Despite the Fed maintaining an aggressive stance, previously hinting at fewer rate cuts than anticipated in 2025, the FOMC meeting remains a pivotal event. A reaffirmation of the Fed's current policy might lead to profit-taking, temporarily depressing Bitcoin's price, whereas a softening in the Fed's stance could drive prices higher.

As Donald Trump's inauguration approaches, a critical question arises: Will Bitcoin investors cash out in a "sell-the-news" event as he assumes office, or will they hold their investments in anticipation of potential deregulatory measures?

Observers note that historical instances of political instability have sometimes slowed Bitcoin's progress, occasionally leading to periods of market consolidation. Markus Thielen, Research Director at 10x Research, predicts that the cryptocurrency market might experience stagnation until mid-March as it awaits a more stable economic environment.

In the Bitcoin options market, recent trading patterns suggest hesitance to fully commit to the current bullish trend. Sean McNulty, head of APAC derivatives at liquidity provider FalconX, commented, "The market remains cautious about fully embracing the recent rise. The upcoming inauguration could disappoint some investors."

Additionally, data from the Derive.xyz derivatives exchange indicates an increase in bearish sentiment. The share of Bitcoin put options has significantly risen, now accounting for 40% of all open interest on Derive.xyz—a sharp increase observed just over the past week.

"This is a sharp increase from 20% just last week and suggests traders are hedging against potential downside risks as we approach the Trump inauguration," Derive.xyz Head of Research Sean Dawson told The Block.

Despite these concerns, some analysts maintain a bullish outlook on Bitcoin. Analyst Lark Davis points out similarities between the current market dynamics and those seen during the previous presidential election, emphasizing Bitcoin's ability to consistently defy traditional market predictions. At that time, a drop towards the $30,000 mark preceded a spectacular rebound to $55,000 shortly after the inauguration.

Bullish investors are betting on crypto-friendly initiatives under Trump's presidency. Global attention is focused on how this unconventional political figure will fulfill the ten major cryptocurrency policy promises made during the campaign. The top ten cryptocurrency policies mainly include:

1. Turning the United States into the global capital of cryptocurrencies

2. Halting the crackdown on the crypto industry within the first hour of his presidency

3. Blocking further development of a Central Bank Digital Currency (CBDC) by the U.S. government

4. Creating a strategic Bitcoin reserve

5. Ousting SEC Chairman Gary Gensler

6. Preventing the U.S. government from selling its Bitcoin holdings

7. Advocating for the use of cryptocurrencies as a solution to the U.S. debt crisis

8. Introducing a comprehensive cryptocurrency policy

9. Forming a cryptocurrency advisory committee

10. Reducing the sentence of Silk Road founder Ross Ulbricht

If implemented, these policies could significantly reshape the regulatory and operational landscape of cryptocurrency in the U.S. and potentially globally.

Understanding Bitcoin's four-year cycle is essential for investors aiming to grasp the cryptocurrency's market dynamics. This cycle revolves around the halving event, occurring every four years, where the reward for mining Bitcoin is reduced by half. This halving significantly decreases the rate at which new bitcoins are created, causing a supply shock.

As the supply tightens, the initial phases of the cycle are marked by steadily climbing prices, fueled by increased attention and participation in the market. Fueled by a fear of missing out (FOMO), retail investors often drive higher prices. However, like all markets, Bitcoin's bull market eventually peaked. In the later prosperity stages, early investors start to cash out. As more new buyers enter the market, prices can surge under speculative excitement and short-term gains, illustrating the cyclical nature of Bitcoin's market.

Looking back historically, from 2014 to 2017, and then from 2018 to 2021, Bitcoin exhibited distinct phases of bear and bull markets, including the pre-bull and subsequent bull phases.

In the current cycle, Bitcoin experienced a downturn in 2022, saw a gradual increase in 2023, and then underwent a significant surge in 2024. If the trend of Bitcoin's four-year cycle holds, we might anticipate a rise in Bitcoin's price in 2025.