Bitcoin drops 30% after Trump's inauguration, mirroring ETF launch pattern

Bitcoin (BTC) has experienced a notable price correction, dropping from $109,000 to $80,000 since the inauguration of President Trump on Jan. 20. This price action mirrors the pattern observed after the launch of U.S. spot bitcoin ETFs in January 2024, where a significant rally was followed by a correction.

In the lead-up to the ETF launch, bitcoin surged from $25,000 to $49,000, a 40% increase. However, the price peaked at the launch and subsequently declined by 20% over the following weeks. This pattern is reminiscent of the current situation, where bitcoin rallied 60% after President Trump's election victory, reaching an all-time high of $109,000 in January before undergoing a nearly 30% correction.

The common thread in both scenarios is that bullish news events triggered a local top in bitcoin’s price, followed by a significant correction. This price action is characteristic of a "sell the news" event, where investors take profits after a major event or announcement.

While the short-term outlook may appear bearish, bitcoin bulls could view this correction as a long-term positive catalyst. The shift in the U.S. administration's stance from hostile to more favorable towards digital assets could bode well for the long-term prospects of bitcoin. However, the lack of immediate buying pressure suggests that short-term weakness may persist.

The next variable to watch is whether bitcoin will start to move higher after this correction has finished. The macroeconomic landscape will play a significant role in determining the direction of bitcoin’s price. Factors such as inflation, interest rates, and geopolitical events could all influence the cryptocurrency market in the coming months.

In summary, the current price action in the crypto market, particularly for bitcoin, is reminiscent of the pattern seen after the launch of U.S. spot bitcoin ETFs. While the short-term outlook may be bearish, the long-term prospects for bitcoin remain positive, given the more favorable stance of the U.S. administration towards digital assets. Investors will be closely watching the macroeconomic landscape to gauge the next move in bitcoin’s price.