What You Need to Know:
- Bitcoin dropped to its lowest value since it surpassed $100,000.
- The decline is partly attributed to high levels of profit-taking.
- Macroeconomic factors are also influencing the crypto market's trends.
Crypto prices faced volatility due to disappointing U.S. economic indicators and heightened profit-taking measures. Bitcoin (@BTC) declined by 1.8% over the past 24 hours to $91,800, marking a price last seen on December 5, the day it breached the $100,000 threshold for the first time. The leading cryptocurrency has seen a drop of over 14% since its peak of $108,278 recorded on December 17.
Ether (@ETH) followed, experiencing a minor drop of 0.7% to $3,320, now 17% down from its December highs, still shy of the all-time high of $4,820 reached in 2021. Solana (@SOL) has shown relative strength against Bitcoin, with its SOL/BTC ratio increasing by 0.35% today.
The CoinDesk 20 index of the top 20 cryptocurrencies by market cap fell by 3.74%. Ripple (@XRP) and Stellar (@XRM) faced the largest decreases, down by 6% and 6.3%, respectively, while Litecoin (@LTC) had a relatively mild fall of 1.9%.
Stocks of cryptocurrency-related firms also experienced losses. MicroStrategy (MSTR) and Coinbase (COIN) saw declines of 7% and 5.3%, respectively, with leading Bitcoin mining companies like MARA Holdings (MARA) and Riot Platforms (RIOT) dropping more than 7% as well.
The current sell-off appears rooted in investors taking profits after Bitcoin surged over 117% this year. The profit-taking volume has now exceeded $1.2 billion on a seven-day moving average, which, while significantly lower than the peak of $4 billion on December 11, is still considerably above average. Moreover, most profits are being realized by long-term holders of Bitcoin.
Macroeconomic indicators also dampen market sentiment, highlighted by the U.S. Chicago PMI indicating the lowest readings since May, potentially foreshadowing an economic downturn. Concerns regarding the Federal Reserve's interest rate policy into 2025 further complicate the situation, as the central bank has indicated it will likely pause any rate cuts until at least March. The anticipated inauguration of President-elect Donald Trump on January 20 may also influence market dynamics. Major indices like the S&P 500, Nasdaq, and Dow Jones have declined by over 1%.
Quote:
"The market exceeded expectations in 2024, but signs of exhaustion signaled the need for consolidation," Joe Carlasare from Amundsen Davis commented. "Looking ahead to 2025, I’m optimistic but expect the path to diverge from consensus, as markets often do. Bitcoin’s adoption continues to grow, and I anticipate it will generally move in line with traditional markets. If the U.S. avoids a significant growth slowdown, bitcoin should perform well, though the ride may be bumpier than in 2024."
