Cryptocurrencies jump as investor appetite shifts to smaller, higher risk coins ahead of President-elect Donald Trump's inauguration

Cryptocurrencies rose broadly on Thursday, with smaller coins outperforming the market as investors awaited President-elect Donald Trump's inauguration.

XRP and litecoin were among the biggest gainers, rising 11% and 20%, respectively, according to Coin Metrics. The CoinDesk 20 index, a broad crypto market benchmark, gained 4%.

Bitcoin, the world's largest cryptocurrency by market capitalization, rose less than 1% to $100,000. The digital asset saw gains of about 7% earlier this week. Ether fell 3% on Thursday.

"Retail investors are looking for opportunities as a new pro-crypto administration gets ready to roll in," Alexander Blume, CEO of adviser firm Two Prime Digital Assets, told CNBC. "The Trump administration is a rising tide that will lift all boats in crypto, and altcoins are seeing some early gains from this."

Trump's inauguration is slated for Monday.

Trading platform operator Coinbase rose 2%, while Robinhood gained more than 1%. MicroStrategy, which trades as a bitcoin proxy, also gained more than 1%.

"The first 50 days of Trump's presidency will determine bitcoin's trajectory in 2025," said Gracy Chen, CEO of crypto exchange Bitget. "The crypto market's expectations for his inauguration and first steps as president are extremely high, which is confirmed by the sensitivity of crypto market prices to statements and appointments made by him in the fourth quarter of 2024."

During his campaign, Trump promised to install a crypto advisory council in his first 100 days in office and replace Securities and Exchange Commission Chair Gary Gensler, who became a notable adversary of the industry during his tenure. The CoinDesk 20 advanced 98% in the one month following the November election. In that same period, bitcoin posted a 46% gain.

Another thing driving the action in small-cap cryptocurrencies is the possibility that the government's "expected strategic reserve may include other 'American' cryptocurrencies," like XRP and the Solana token, Blume said.

"This is unlikely, [but] it comes as a surprise and is fueling speculators to buy the coins," he said. "The best long-term value for investors will still be in bitcoin."

Trump has also promised to establish favorable regulation to encourage domestic "made in the USA" bitcoin mining and launch a strategic national bitcoin stockpile. Investors expect volatility in the flagship cryptocurrency this year, with bitcoin stuck in a tug of war between investors' concerns about rising inflation under Trump and their optimism over his pro-crypto leadership.