This Week in Bitcoin: BTC Blasts Off Ahead of Trump Inauguration

This week, Bitcoin had quite the rollercoaster ride, starting off sluggish but finishing strong. It surged past $105,000 per coin just as Donald Trump, who touted a pro-crypto stance during his campaign, prepared for his second term inauguration on Monday.

The week began with Bitcoin struggling to stay above a two-month low, dipping below $90,000. Many traders were wary of what the Federal Reserve might do regarding interest rates this year.

However, by midweek, new data revealed an increase in inflation, with the Consumer Price Index rising by 2.9% over the past year. This information led traders to speculate that the Federal Reserve might consider another rate cut.

Historically, Bitcoin tends to perform better in low interest rate environments. As traders reacted positively to the prospect of lower borrowing costs, Bitcoin rose above $99,000 and reclaimed the $100,000 mark, continuing its ascent.

Additionally, reports that Trump planned to issue crypto-related executive orders during his first week in office boosted investor confidence, helping lift Bitcoin to its current levels.

ETF Flows

A significant portion of the funds pouring into Bitcoin comes from exchange-traded funds (ETFs). The United States holds a commanding position in the global economy, and large investments in these products can significantly influence market sentiment.

At the start of the week, investors pulled out hundreds of millions from these funds due to uncertainties surrounding the central bank's next steps. However, by Wednesday, the trend shifted, and approximately $755 million flowed back into the funds. Thursday saw an even larger influx of $626 million, with Friday outperforming both previous days.

Mining Difficulty Peaks

This week, not only did Bitcoin's price rise, but its mining difficulty also hit a new all-time high of 110.45 trillion. This increase means it has become more challenging to mine new blocks within the Bitcoin network.

During mining, computers around the world compete to solve complex mathematical problems to add new blocks to the blockchain. An increase in mining difficulty indicates that the network is functioning properly and remains secure.

Bitfinex Hack Update

In other notable news, the U.S. Department of Justice announced that the recovered Bitcoin stolen in the infamous 2016 Bitfinex hack should be returned to the exchange. The DOJ stated there were no "victims" in this case involving Ilya Lichtenstein, who stole around 120,000 Bitcoin (worth over $12 billion today), along with his wife, Heather "Razzlekhan" Morgan, who helped launder some of the funds.

Approximately 90,000 Bitcoin has been recovered, which could be returned to Bitfinex, a company that claims it fully compensated its customers through a previous repayment program. However, some customers disagree, especially given the significant increase in Bitcoin's value since the incident.

Gensler Disregards Crypto—But Not Bitcoin

Gary Gensler, the current SEC Chair and often seen as a critic of the crypto industry, indicated in a recent interview that while he views many cryptocurrencies as unregulated securities, Bitcoin might eventually be treated like a commodity, akin to gold.

He noted Bitcoin's potential to be a long-lasting asset, similar to gold, which has been traded for millennia, stating, "We have Bitcoin. It might be something else in the future, as well."

Trump's Executive Order

Reports suggest that Trump is planning to issue a crypto-focused executive order on his first day in office. This could involve reforms aimed at helping the industry, including the establishment of a crypto working group to align regulators with the industry's needs.

During his campaign, Trump promised to support Bitcoin and the crypto space overall.

Coinbase Bitcoin Loans

Lastly, Coinbase, the largest cryptocurrency exchange in the U.S., has reintroduced Bitcoin-backed loans after halting the service two years ago. This lending option allows investors to use their Bitcoin as collateral to borrow up to $100,000 in the USDC stablecoin.

The relaunch of this service will be facilitated by Morpho, a lending protocol on the Ethereum layer-2 network that Coinbase developed.

Bitcoin, Trump, Inflation