In the lead-up to President Donald Trump’s inauguration on January 20, Bitcoin experienced considerable volatility. The market underwent sharp price fluctuations the week prior, with a surge in trading activity from U.S. investors over the weekend. The political uncertainty accompanying the inauguration, along with the introduction of the $TRUMP and $MELANIA memecoins, contributed to the instability, causing Bitcoin’s price to reach an all-time high of $109,460 before subsequently retracting.
According to data from CryptoQuant, U.S. market activity was a key factor behind this volatility. The Coinbase premium, which measures the price difference between Bitcoin on Coinbase and Binance, showed a notable drop in the days leading up to the inauguration.
Additionally, the related metric known as the Coinbase premium index turned negative during this period.
This decline suggests either lower demand or increased selling pressure from U.S. investors. Historically, a positive Coinbase premium indicates strong institutional interest, making this drop a sign of rising uncertainty among U.S. market participants.
Further evidence of the heightened selling by U.S. investors is reflected in the exchange reserve ratio, which tracks the reserves on U.S. exchanges compared to those on offshore platforms. The exchange reserve ratio began to decline on January 15, suggesting that Bitcoin reserves on U.S.-based exchanges fell at a faster rate than those on offshore exchanges. Such trends typically point to increased withdrawals or diminished domestic liquidity, amplifying overall market volatility.
During the same timeframe, the U.S. Dollar Index (DXY) experienced a significant decline, indicative of macroeconomic uncertainty related to the political transition. Bitcoin’s historical inverse correlation with the dollar further supports the notion that the U.S.-based selling was influenced by broader market risk aversion.
While the U.S. market was the primary catalyst for initial Bitcoin volatility, international markets helped stabilize the cryptocurrency’s price. Offshore exchanges showed relative resilience, with reserves increasing as those in the U.S. declined. This trend indicates that global participants, particularly outside the U.S., were accumulating Bitcoin during the selloff, absorbing some of the selling pressure and thereby preventing a more significant price drop.
The slight recovery in the Coinbase premium after January 19 suggests that global demand remained strong. As U.S. selling pressure eased, offshore liquidity likely bolstered Bitcoin’s price, showcasing the capacity of the global market to mitigate localized volatility. This also highlights the substantial influence of the U.S. market on Bitcoin’s price; political and macroeconomic developments in the U.S. have historically been significant drivers of market sentiment, especially since platforms like Coinbase cater to a considerable number of institutional and prominent investors.
The data indicates that U.S. investors were the main contributors to Bitcoin’s weekend volatility prior to the inauguration, as evidenced by falling Coinbase Premiums, a significant drop in the U.S. to offshore reserve ratio, and a weakening DXY. However, global markets—especially offshore platforms—played a crucial role in stabilizing Bitcoin’s price. This reinforces the notion of Bitcoin as a resilient, globally traded asset capable of withstanding localized disruptions while maintaining long-term stability.
This article was originally published on CryptoSlate under the title “US market drove Bitcoin’s volatility ahead of Trump’s inauguration.”
