5 min readBitcoin is rising on Tuesday, extending gains to fresh record highs on optimism over a more crypto-friendly environment under Donald Trump and on hopes of a strategic Bitcoin reserve.
After spending last week hovering around 100k, Bitcoin rose to 105k on Monday and then to a fresh all-time high of 107k on Tuesday. Bitcoin has gained over 50% since the US Presidential election at the start of November.
The latest leg higher came after President-elect Donald Trump raised the prospect of a Strategic Bitcoin Reserve similar to the US government’s strategic oil reserve during an interview with CNBC at the weekend.
Trump’s comments follow his pro-crypto stance throughout the election campaign and his recent nomination for key cabinet positions, which have also been pro-crypto.
While Bitcoin has rallied following Trump’s Bitcoin reserve comments, there are still some doubts over how this could be formed and, perhaps more importantly, how it could be funded. While the Republicans hold a majority in Congress, the already high federal deficit means the government is raising the deficit further to fund the purchase of additional coins. Bipartisan lawmakers will likely oppose this, especially as the high fiscal deficit is a key concern.
The Department of Justice currently holds around 200,000 bitcoins, mainly confiscated from criminals. This stockpile could potentially be converted into reserves.
MicroStrategy joins Nasdaq & buys more BTC
Also keeping Bitcoin buoyant is the news that MicroStrategy will join the US Nasdaq 100 index. This means that passive funds will purchase the stock, and as a result of MicroStrategy’s Bitcoin purchases, the level of indirect exposure to Bitcoin will rise significantly.
As announced yesterday, MicroStrategy added 15,350 BTC to its reserves at a cost of around $1.5 billion. The latest purchase, which was an average price of $100,386 per BTC, was acquired in proceeds from a share issuance and sale. The acquisition brings MicroStrategy’s total Bitcoin holdings to 439,000 or 4$5.6 billion at an average price of $61,725.
Fed rate decision
Attention is now turning to the Federal Reserve interest rate decision tomorrow. The Fed is widely expected to reduce interest rates by 25 basis points to 4.25%- 4.5%, marking the third consecutive rate cut. The meeting comes after US inflation rose to 2.7% YoY in November, up from 2.6%, and the latest jobs data showed a resilient labour market.
Given that the rate cut is expected and priced in, the focus will be on communication and forward guidance. Given the recent data and labour market resilience, the Fed could point to a slower pace of rate cuts in 2025.
Could Ethereum rise to 5k?
Ethereum, which has lagged Bitcoin in the rally since November, appears to be playing catch-up. It has risen above $4k for the first time since March but still remains below its all-time high of $4865, reached in 2021. Meanwhile, Bitcoin has powered to numerous fresh record highs this year.
However, the picture is changing for Ethereum. Institutional demand, on-chain metrics and network activity could set Ether up to reach 5K for the first time. Ether ETFs have seen a record 13-day run of net inflows. Meanwhile, total daily transactions have hovered around 6.5 million to 7.5 million compared to 5 million in 2023, pointing to higher network activity.
A continuation of these trends could see ETH rise above 4865 towards fresh ATHs and 5k.
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