Despite the additional zeros promised by many analysts, the bitcoin rate this week fell from $100,000 to $94,000, causing panic among investors. The BTC price drop has started to sink altcoins as well. Most tokens are losing value. Let’s understand the reasons and whether there are reasons for anxiety.
In short: Trump is to blame again (sarcasm). In a few days, Bitcoin lost 8% of its value amid news about a new illness from China — Human Metapneumovirus (HMPV), and an announcement from the president-elect of the USA that he is considering the possibility of declaring a national economic emergency in the country to expedite the introduction of new trade tariffs.
Cryptocurrencies are often seen as a hedge against the uncertainty of the traditional financial system. Thus, a strong economy pushes central banks to raise interest rates. This makes bonds more attractive, diverting investments from risky assets such as cryptocurrencies. There has been an increase in the yield of 10-year US Treasury bonds to 4.65% (almost a multi-year high) following the news about an increase in job vacancies in the US labor market. On Tuesday, the Bureau of Labor Statistics released data for November. The number of vacancies rose to 8.1 million, compared to 7.8 million in October.
Overall, amid these events, investors sold 23,000 BTC at a loss, and “whales” with 10,000 BTC or more began to sell their bitcoins more actively, the same applies to owners of smaller cryptocurrencies. In the short term, the value of Bitcoin dropped to $92.5 thousand. Also, over $631 million in leveraged positions were liquidated over the last day, which intensified volatility.
Bitcoin-ETF and ether-ETF experienced a significant outflow of capital, amounting to $582 million for bitcoin and $159.3 million for ether. This became the second-largest outflow in history.
This coincided with statements from the Federal Reserve System (Fed) about the possible maintenance of high interest rates.
Moreover, as he leaves the position of SEC Chairman, Gary Gensler in an interview with Bloomberg stated that he sees the cryptocurrency market divided into two parts: bitcoin and everything else. His comment showed the regulator’s approach to crypto assets and raised questions about future regulations.
The head of the CFTC, Rostin Behnam, who is also preparing to leave his post on January 20, predicts that developing new rules for cryptocurrencies may take up to two years. This creates an environment where investors must adapt to prolonged uncertainty.
Analysts note that the key support level is $91,000. If bitcoin does not hold above this mark, the market will continue to fall.
But despite the short-term drop, analysts remain optimistic about the future of bitcoin. Forecasts for 2025 include a possible increase to $150,000 due to an increase in the global money supply.
Actions of the Federal Reserve System and subsequent economic data will be key to the further development of events in the crypto market in 2025.
Source: The Motley Fool, CoinMarketCap, CoinDesk