Bitcoin recovered from its biggest two-day retreat since the US election in choppy trading that reflects shifting assessments of the impact of President-elect Donald Trump's policy agenda.

The digital asset fell almost 3% between Nov 16 and Nov 17 before rising back to US$90,237 as of 12:11pm on Nov 18 in London. Trump has made various pro-crypto pledges but there are open questions about the timetable for implementation and whether all are feasible — such as setting up a US Bitcoin stockpile.

Inflation Risks

While Trump's business-friendly stance has enlivened US equity and crypto investors alike, some of the optimism is being tempered by inflation risks from the prospect of trade tariffs and deficit spending to fund tax cuts.

Investors are scaling back expectations for Federal Reserve interest-rate cuts in a solid US economy, a possible hurdle for crypto since liquidity conditions can influence speculative demand for digital tokens.

Trump has vowed to create a friendly regulatory framework for digital assets, set up a strategic Bitcoin stockpile and make the US the industry's global hub. A one-time crypto sceptic, the president-elect changed tack after digital-asset firms spent heavily during election campaigning to promote their interests.

Regulation Shift

Crypto legislation may be approved soon under the Trump administration, spurring a shift away from regulation by enforcement to a more collaborative approach.

Banks could enjoy greater scope to engage with digital assets and markets are more hopeful of approval for crypto exchange-traded funds investing in tokens other than just the top two, Bitcoin and Ether.

US spot-Bitcoin ETFs attracted a net inflow of US$4.7 billion from Nov 6 to Nov 13, the day the original cryptocurrency set an all-time peak of US$93,462, data compiled by Bloomberg show. About US$771 million exited the products between Nov 14 and Nov 15, leaving the group with total assets of US$95 billion.