Market update - January 24th 2025

The major topic this week has been Trump’s inauguration. The crypto community was disappointed that cryptocurrency wasn’t mentioned in Trump’s initial speech or included in any Executive Orders so far. However, he finally addressed the crypto industry on Thursday by signing an Executive Order to support the sector’s growth. Meanwhile, Sen. Cynthia Lummis was appointed Chair of the Senate Banking Subcommittee on Digital Assets, reviving the campaign promise of creating a Strategic Bitcoin Reserve. The market, however, remains unconvinced. Notably, the Polymarket odds of Trump creating a Bitcoin reserve within his first 100 days dropped from 48% before the inauguration to 22% as of Friday, January 24th, although the longer term Polymarket odds remain high at 61%. 

Among the Executive Orders signed so far, the National Energy Emergency could have significant economic implications. It’s expected to accelerate permits for fossil fuel infrastructure, boosting oil and gas supply in the U.S. This development could be bullish for U.S.-based Bitcoin miners, particularly in deregulated and gas-heavy markets like Texas.

Tariffs, however, could have a more immediate impact. If Trump follows through with his proposed 25% tariffs on Mexico and Canada, it could influence inflation as early as January. For instance, Mexico supplies over 20% of all cars sold in the U.S., Canada accounts for 17%, and about half of the components in domestically produced cars are imported. Tariffs would also ripple through industrial suppliers further up the supply chain. While some sectors have adapted to similar measures during Trump’s first term, a scramble for parts or goods ahead of tariff implementation could put upward pressure on prices this month. If I were in the U.S. and considering buying a car, I’d do it now rather than wait until February.

Interestingly, investors don’t appear to be pricing in these potential impacts yet. U.S.-based automakers like GM and Ford, as well as other manufacturers, have performed strongly in recent days. Meanwhile, the 10-year Treasury yield dipped on the first trading day after the inauguration, although there has been little movement in rate cut probabilities for 2025 so far.

Another key moment during Trump’s inauguration week was his mention of AI. On Tuesday, OpenAI and SoftBank announced a joint venture, Stargate, committing an initial US$100 billion and up to US$500 billion over the next four years. While details remain vague, the initiative aligns with Trump’s ambition to position the U.S. as a global leader in AI. The plan was unveiled at a White House ceremony with President Trump, with SoftBank shares surging 10% overnight in Tokyo.

Digital asset investment products had a very strong week last week, recording $2.2bn of inflows, with bitcoin alone accounting for $1.9bn. The strong flows have continued into this week, with US$1.34bn of inflows so far, of which $1.1bn into Bitcoin and $191m into Ethereum. The large flows are most likely linked to the Trump inauguration euphoria and the attention revolving around the Trump and Melania coins.