This Week in Bitcoin: BTC Soars Before Trump's Inauguration

Bitcoin had an eventful week, ending on a high note as it surpassed $105,000 per coin just before Donald Trump, who identified as a pro-crypto candidate, is set to be inaugurated for his second term on Monday.

The week began on a down note, with Bitcoin trading at a two-month low under $90,000. Traders were apprehensive about the Federal Reserve's upcoming decisions concerning interest rates in 2023.

However, things took a turn when new data released on Wednesday indicated that inflation had risen towards the end of last year, with the Consumer Price Index climbing 2.9% year-over-year through December. This led traders to believe that another Fed rate cut might be in the works.

Historically, Bitcoin performs well in an environment of low interest rates. The possibility of a rate cut made Bitcoin more appealing, and it quickly climbed past $99,000 before reclaiming the $100,000 milestone and continuing its upward trajectory.

The news that Trump plans to announce crypto-related measures during his first week in office also contributed to the price increase of Bitcoin.

ETF Flows

Much of the money flowing into the Bitcoin market comes from investors buying shares in new exchange-traded funds (ETFs). As the world's largest economy, the U.S. has significant financial influence, and high inflows into these products can sway market sentiment.

Earlier in the week, funds experienced hundreds of millions in outflows as investors reacted to uncertainties surrounding the central bank's future actions. However, by Wednesday, the trend reversed, with $755 million entering the funds, according to Farside Investors data. Thursday was another exceptional day with an additional $626 million flowing in, while Friday saw even greater inflows.

Mining Difficulty Peaks

It's not just Bitcoin's price that surged this week; the mining difficulty for the cryptocurrency also hit a new record high. The current difficulty level stands at 110.45 trillion, indicating that it has become increasingly challenging to mine new blocks.

In the mining world, various computers race to solve complex mathematical problems to add new blocks to the blockchain. An increase in mining difficulty signifies a well-functioning network.

Bitfinex Hack Update

In another development, the U.S. Department of Justice announced that Bitcoin recovered from the infamous Bitfinex hack in 2016 should be returned to the exchange. The authorities noted that there were no identifiable victims in the case where Ilya Lichtenstein reportedly stole approximately 120,000 Bitcoin, valued at over $12 billion today, with the assistance of his wife, Heather Morgan.

About 90,000 Bitcoin has been recovered and could be returned to Bitfinex, which previously compensated customers through a repayment scheme. Yet, some customers feel differently, especially as Bitcoin's value has significantly increased since the hack.

Gensler on Crypto

SEC Chair Gary Gensler, often seen as an opponent of the cryptocurrency sector, is set to be replaced. In a recent interview, he mentioned that while he views many cryptocurrencies as unregulated securities, he believes Bitcoin could be traded like commodities such as gold in the future.

Gensler alluded to gold’s long trading history, stating, "We have Bitcoin. It might be something else in the future as well."

Trump's Executive Order

Sources indicated that President Trump plans to issue a crypto-centric executive order on his first day in office. Various reforms are being considered, which might include directing regulators to form a crypto working group for better industry coordination.

The president’s campaign included promises to support Bitcoin and the broader cryptocurrency space.

Coinbase Bitcoin Loans

In recent news, Coinbase, the leading crypto exchange in the U.S., has resumed offering Bitcoin-backed loans after halting the service two years ago. These loans permit users to leverage their Bitcoin as collateral and borrow up to $100,000 in USDC stablecoin without delay.

The service will utilize Morpho, a lending protocol on Base, an Ethereum layer-2 network developed by Coinbase.

Bitcoin, Trump, Crypto