This Week in Bitcoin: BTC Soars Before Trump Inauguration

Bitcoin ended the week on a high note, swiftly climbing above $105,000 ahead of Donald Trump's inauguration for his second term in office on Monday. Trump has been recognized as a supporter of cryptocurrency, which fueled investor interest.

The week started off on a quieter note, as Bitcoin traded at a two-month low, dipping below $90,000. Traders were hesitant due to uncertainty around the Federal Reserve's plans for interest rates in the upcoming year.

However, everything changed on Wednesday when new data revealed a rise in inflation, with the Consumer Price Index showing a 2.9% increase over the last year. This news sparked speculation that the Federal Reserve may consider additional rate cuts, making a low-interest environment, which historically benefited Bitcoin, more feasible.

As traders reacted positively to this information, Bitcoin broke past $99,000 and soon regained the $100,000 benchmark, continuing its sharp increase. Additionally, anticipation that Trump would introduce crypto-related orders during his first week in office further lifted the cryptocurrency's price.

ETF Flows

A significant share of the inflow of capital into the Bitcoin space has been driven by investments in newly introduced exchange-traded funds (ETFs). As one of the largest economies, the U.S. tends to influence market sentiment significantly through these investment products.

At the beginning of the week, many investors withdrew capital from these funds, likely due to fears stemming from the Federal Reserve’s potential actions. However, the mood shifted by Wednesday, with around $755 million reinvested into funds, followed by another remarkable addition of $626 million on Thursday. Friday became even more notable, with continued enthusiastic investment.

Mining Difficulty Reaches New Heights

This week also saw Bitcoin's mining difficulty reach an all-time high, now standing at 110.45 trillion. This means it has become increasingly challenging to mine new blocks on the Bitcoin network. In cryptocurrency mining, participants around the world compete to solve complex mathematical equations to add new blocks to the blockchain. Higher difficulty levels indicate that the network is functioning effectively.

Bitfinex Hack Recovery Update

In other developments, the U.S. Department of Justice announced that the Bitcoin recovered from the infamous 2016 Bitfinex hack should be returned to the exchange. The authorities clarified that there were no direct "victims" as Ilya Lichtenstein was responsible for stealing around 120,000 Bitcoin, worth more than $12 billion today, with the assistance of his wife, Heather Morgan, in laundering the funds.

Almost 90,000 Bitcoin has been retrieved and is slated to return to Bitfinex, which claimed it had compensated affected customers years prior through a repayment program. Nonetheless, there are discrepancies in opinions among customers, especially now that Bitcoin's value has soared.

SEC Chair Comments on Bitcoin

Gary Gensler, the controversial SEC Chair, also hinted at changes as he prepares to leave the position. In an interview, he expressed that many cryptocurrencies might be viewed as unregulated securities, while Bitcoin could be considered for categorization as a commodity, akin to gold.

He referenced gold’s long-standing market history, stating: "We have Bitcoin. It might be something else in the future, as well." This statement appeared to signal a shifting perspective on Bitcoin’s regulatory status.

Trump's Proposed Executive Order

Sources reported that the new president intends to introduce a crypto-related executive order on his first day in office. A range of reforms is being discussed, including the establishment of a crypto working group among regulators to enhance cooperation and understanding within the industry. Trump pledged during his campaign to support Bitcoin and the entire cryptocurrency market.

Coinbase Announces Bitcoin Loans

In a final update, Coinbase, the largest cryptocurrency exchange in the U.S., has reinstated Bitcoin-backed loans after halting them two years ago. This service enables customers to leverage their Bitcoin as collateral to secure loans of up to $100,000 in USDC, a stablecoin.

The newly launched service will be facilitated by Morpho, a lending protocol developed on Base, which is an Ethereum layer-2 network initiated by Coinbase.

Bitcoin, Trump, ETFs