As a new year dawns, the crypto markets are abuzz with anticipation. Bitcoin is on the cusp of reclaiming the vaunted $100,000 mark for the first time since its euphoric rise in 2021. Altcoins are rallying on the backs of whale accumulation and lofty price predictions. Even gold is glittering again as investors seek safe havens amid the transition of power in Washington D.C. But will this early 2025 exuberance give way to the volatility that has come to define the mercurial asset class?
Bitcoin’s Inaugural Breakout?
Bitcoin bulls are eyeing a potential catalyst on the horizon – the January 20th inauguration of Donald Trump. Derivatives data shows over $1.5 billion in notional open interest for the $120,000 BTC call option strike price on Deribit, signaling traders see the real estate mogul turned politician as a potential booster shot for the OG cryptocurrency.
JPMorgan analysts tie the bullish bets to an expectation that the “debasement trade” that drove BTC to record highs in 2024 will accelerate under a Trump administration. With the U.S. staring down elevated debt levels and the geopolitical backdrop still fraught, the thesis goes, demand for inflation hedges like bitcoin will only intensify.
“The debasement trade is here to stay, with both gold and Bitcoin becoming increasingly important components of investors’ portfolios.”
– JPMorgan
That narrative is music to the ears of firms like MicroStrategy, which announced plans to raise another $2 billion via preferred stock to acquire more bitcoin in Q1. Meanwhile, crypto hedge fund Metaplanet declared its intention to purchase 10,000 BTC by year-end, a haul worth nearly $1 billion at current prices.
Altcoin Mania 2.0?
Bitcoin isn’t the only crypto enjoying the 2025 bounce. Ethereum has surged over 10% to start the year, though a report from economist Ben Lilly suggests the upside may be capped by a growing portion of ETH supply getting locked in delta-neutral positions via the Ethena DeFi protocol.
Lower cap coins are seeing even frothier action. Perennial meme coin Dogecoin has rocketed 21% on a combination of major whale buys, rising perpetual futures open interest, and a bullish report from Galaxy Research predicting DOGE could fetch $1 before 2026, for a fully diluted market cap of over $100 billion. Other alts like Solana, Cardano, and Fantom are recording double-digit gains on the week.
“Bottom line, crypto’s lower-liquidity state could fuel rallies of a much greater magnitude than the incremental moves in bitcoin.”
– Sean Farrell, FundStrat
Return of the Gold Rush?
Precious metals are also drawing renewed interest on the “Trump volatility trade”. Geopolitical concerns amplified by the ex-president’s brash style and unconventional policy stances have investors bracing for turbulence. Gold jumped 27% in 2024 and analysts are projecting another strong year.
“There will definitely be more stimulus and pressure on the dollar; all the factors that supported gold in 2024 are still here.”
– Hans Goetti, HG Research
Reasons for Caution
While crypto market participants are brimming with confidence, the spectre of volatility continues to hover over the industry. Digital assets have a history of surging out of the gates in January only to succumb to sharp drawdowns later in the year.
- Rising real yields powered by economic optimism and receding Fed rate cut bets threaten to sap some of the momentum propelling risk assets.
- Potential regulations from the incoming administration could kneecap some of the crypto market’s wilder elements.
- Any easing of inflation expectations or geopolitical tensions would undercut key bull cases for both crypto and gold.
Navigating these cross currents will be crucial for investors seeking to plot a course through crypto’s uncharted waters. A blockbuster jobs report later this month could throw cold water on the market’s more sanguine assumptions. For now though, the animal spirits are running rampant – and chasing new milestones with each passing day.
