Investors flock to risky small-cap cryptos before Trump’s inauguration

The crypto market has gone absolutely wild, and it’s all because of one man: Donald Trump. As his inauguration draws near, investors are betting big on small-cap cryptocurrencies, driving up prices.

The market is flooded with anticipation, and it’s not subtle. XRP shot up 13%, and Litecoin soared a ridiculous 22%. Meanwhile, Bitcoin is hanging around $100,000 after a modest 1% gain, and Ethereum, oddly enough, dropped 3%.

Everyone’s chasing gains before Trump officially steps into office, hoping his pro-crypto agenda will electrocute the market.

Altcoins are stealing Bitcoin’s thunder

Since Trump’s election win in November, the CoinDesk 20 index has skyrocketed 98%, with Bitcoin itself posting a respectable 46% gain in the same period.

But those numbers pale in comparison to what’s happening with smaller coins. One wild theory making the rounds is that Trump’s team could establish an “American crypto reserve.”

This would supposedly include XRP and Solana. While most experts think this is a long shot, it’s not stopping speculators from throwing money at these tokens.

Trump himself has yet to confirm these claims. Meanwhile, crypto trading platforms like Coinbase and Robinhood both saw their stocks climb about 2%. MicroStrategy, famous for hoarding Bitcoin like a dragon with gold, ticked up slightly.

Rate cuts, inflation, and a Federal Reserve twist

As if the crypto frenzy wasn’t enough, the Federal Reserve is throwing its own brand of unpredictability into the mix. Federal Reserve Governor Christopher Waller dropped a bombshell during an interview, saying that rate cuts could come as early as the first half of the year.

If inflation continues to cool, Waller said, “I can certainly see rate cuts happening sooner than maybe the markets are pricing in.” His comments immediately sent traders scrambling. Market-implied odds for a May rate cut shot up to 50%, and expectations for a second reduction by year-end jumped to 55%.

Inflation, which has been stubbornly high, slowed to a 3.2% core reading in December, fueling hopes that the Fed might ease up on its aggressive policies.

But here’s the thing, Waller also admitted that if inflation doesn’t behave, rate cuts could be limited to just one or two. “If the data doesn’t cooperate, then you’re going to be back to two and going maybe even one,” he said. So, while the market is pricing in a rosier scenario, there’s still a lot that could go wrong.

Lower interest rates typically boost riskier assets like cryptocurrencies, and any signs of a dovish Fed could add even more fuel to the already blazing market.

The Federal Open Market Committee (FOMC) is set to meet on January 28-29. Markets aren’t expecting much action this time around, but the meeting will still be closely watched for clues about the Fed’s next moves.

Waller said, “We’re in really no rush to do things,” but that doesn’t mean the market isn’t bracing for surprises.

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