Reg Optimism, Implicit Fed Support, & Insti Demand to Boost BTCBitcoin prices surged on President Trump’s inauguration day (Jan 20), reaching an all-time high of USD 109,000. However, since then, prices have stagnated. Recent tariff announcement has driven a sharp selloff.
Optimism about a crypto-friendly Trump administration continue to fuel bullish sentiment, but the lack of concrete regulatory guidance has limited near-term momentum.
MACRO FACTORS AT PLAY
BTC remains below key resistance levels, limiting upward momentum. However, it has outperformed equities in the current macroeconomic environment. While equities faced an AI-driven selloff last week, BTC showed resilience, rebounding quickly from its Jan 24 lows. Additionally, BTC has benefited from market uncertainty, like gold, which is also trading near an all-time high.
The recent FOMC meeting initially pressured BTC, as the Fed held rates steady and expressed inflation concerns. However, BTC rebounded 2.4% after Fed Chair Powell clarified that changes in inflation-related language were not intended as a strong signal.
Source: CME FedWatch
The Federal Reserve’s latest dot plot suggests only two rate cuts in 2025. Market expectations, per the CME FedWatch tool, align with this outlook. While a higher-rate environment limits tailwinds for BTC, bullish sentiment continues, driven by regulatory anticipation and increasing institutional and sovereign adoption.
BREAKING DOWN TRUMP’S EXECUTIVE ORDER
On Jan 23, President Trump issued an executive order titled "Strengthening American Leadership in Digital Financial Technology." The order emphasizes fostering digital asset growth while maintaining U.S. financial sovereignty, particularly through USD-backed stablecoins. It also protects citizens’ rights to use blockchain networks without government interference.
Key provisions include:
1. Creation of a National Economic Council working group on digital assets, chaired by David Sacks.
2. Review of existing regulations within 30–60 days, followed by a report to the President in 180 days.
3. Consideration of a national digital asset reserve while explicitly prohibiting government action on (Central Bank Digital Currency) CBDCs.
U.S. BITCOIN RESERVE: REALITY CHECK
While the executive order affirms the administration’s pro-crypto stance, it stops short of immediately establishing a national Bitcoin reserve. If approved, the reserve would take shape in at least six months, delaying any near-term impact.
The working group may begin by utilizing seized cryptocurrency rather than purchasing new BTC. The U.S. government currently holds 198,000 BTC (~USD 20B, as of Feb 1) and USD 400M in other crypto assets.
For context, U.S. strategic reserves include: (a) Gold: 8,133 tonnes (~USD 737B as of 31/Jan), (b) Crude oil: 395M barrels (~USD 28B, as of 24/Jan), and (c) Foreign currency reserves: ~USD 239B (Q3 2024).
The U.S. gold reserve accounts for 3.8% of the total above-ground gold stock, while its Bitcoin holdings currently represent just 1% of the total supply. To match the gold reserve proportion, U.S. Bitcoin holdings would need to increase by 554,000 BTC, valued at approximately USD 55 billion at current prices. Over time, a Bitcoin reserve could realistically expand by USD 50 billion to USD 70 billion.
Meanwhile, several U.S. states are advancing their own Bitcoin reserve proposals. 15 states are considering BTC-related fiscal policies, with:
• Oklahoma, New Hampshire, Pennsylvania proposing 10% public fund allocations
• Texas suggesting a donation/tax model
• Arizona and Utah advancing legislation beyond committee stages
REGULATORY CERTAINTY FOR BANKS
Fed Chair Powell recently confirmed that banks can engage with crypto provided they manage associated risks. While this imposes stricter compliance requirements, it provides much-needed clarity following the post-FTX banking shakeout that shuttered major crypto-focussed banks.
Fund Flows: Institutional Demand Remains Strong
BTC ETFs saw record one-day inflows of over USD 1B on Trump’s inauguration eve. Since then, daily inflows have averaged USD 257M, with only one outflow day (-USD 457M on Jan 27).
Cumulative BTC ETF inflows since Jan 20 now total USD 2.3B, pushing assets under management (AUM) to nearly USD 118B.
Source: Arkham Intelligence
Notably, ETF investors remain highly profitable at current prices. Arkham Intelligence data shows IBIT ETF holders sitting on a 45% gain, which may limit immediate selling but could lead to some profit-taking.
MicroStrategy remains a major BTC buyer. The company recently completed a USD 584M perpetual convertible offering to acquire more BTC, potentially fuelling short-term upside.
TECHNICAL ANALYSIS & TRADE SETUP
BTC’s recent pullbacks have ranged from 10.1% to 23.6% Fibonacci levels, like the 2018 bull cycle according to Glassnode .
Source: Glassnode
The drawdown since reaching ATH on 20/Jan represents a ~13% move which suggests the drawdown is larger than usual ones during this cycle.
Historically, this phase of the bull run experiences FOMO-driven price acceleration, though long-term holders’ profit-taking presents a headwind.
BTC fell below the 50-day MA over the weekend, this level has served as support recently. The 92k level is also significant as it has provided support several times during recent retracements. However, in case the selloff deepens, the next significant support may be as far as the 100-day MA at 85k.
HYPOTHETICAL TRADE SETUP
BTC has outperformed equities amid macro uncertainty and is increasingly correlated with gold (30-day correlation: 0.67). Recent tariff announcement in the US has driven a sharp selloff.
Despite a less-than-ideal FOMC outcome, BTC retains several bullish drivers, supported by Regulatory optimism following Trump’s executive order, Fed Chair Powell’s statements on crypto banking, and Institutional & sovereign demand.
The recent selloff offers a tactical opportunity to build long positions during volatile drawdowns.
Investors can opt for the following hypothetical trade setup consisting of long position in CME Micro Bitcoin Futures expiring on 28/Feb (MBTG2025). Each contract of MBT provides exposure to 0.1 BTC and requires margin of USD 2,451 as of 31/Jan.
• Entry: 94,000
• Target: 100,585
• Stop Loss: 90,000
• Profit at Target: USD 659 ((100,585-94,000) x 0.1 BTC per contract)
• Loss at Stop: USD 400 ((90,000-94,000) x 0.1 BTC per contract)
• Reward-to-risk Ratio: 1.65x
CME Group lists a raft of products covering a range of asset classes more accessible while also enabling granular hedging for portfolio managers.
Portfolio managers can learn more on how to access these micro products by visiting CME Micro Products page on CME portal to discover micro-sized contracts to gain macro exposures.
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MARKET DATA
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