What to know:
- Bitcoin has dropped nearly 10% over two days, wiping out most of its early gains in 2025, with Cardano's ADA, Render's RNDR, and Aptos' APT experiencing significant losses in the CoinDesk 20 Index.
- Factors contributing to this downturn include strong U.S. economic data, rising bond yields, and inflation concerns, coupled with uncertainties surrounding President-elect Trump's tariff policies.
- Analysts believe Bitcoin may stabilize before potentially resuming its upward trend, influenced by upcoming economic releases and Trump's inauguration.
Bitcoin (BTC) saw a sharp decline on Wednesday as heightened global economic fears and rising bond yields triggered a sell-off in crypto assets. During U.S. trading hours, it fell to $92,600, marking a nearly 10% drop from its peak above $102,000 earlier in the week and trading around $94,300, down 2.5% over the past 24 hours.
Cardano's ADA, along with Render's RNDR and Aptos' APT, led the declines in the CoinDesk 20 Index, which fell more than 3% in that timeframe. The severe two-day decline liquidated about $1 billion in leveraged derivatives positions across crypto markets, primarily involving bets on rising prices. CoinGlass indicates that this downturn brought BTC to levels below those at the start of the year, although it still represents a 1% gain compared to its January 1 price.
Crypto-related equities also faced backlash, with several Bitcoin miners like TeraWulf (WULF), Bit Digital (BTBT), Bitdeer (BTDR), IREN (IREN), and Hut 8 (HUT) suffering losses between 5% and 8%. Additionally, the medical device manufacturer Semler Scientific, which adopted a Bitcoin treasury strategy similar to MicroStrategy's (MSTR), saw a nearly 10% decrease on the day and over 15% for the week.
Analysts have warned that crypto traders could face challenging conditions in January, stemming from potential macroeconomic headwinds such as a hawkish Federal Reserve, skyrocketing long-term government bond yields, persistent inflation, and the likelihood of a U.S. government shutdown. The recent strong economic data prompted investors to reconsider their rate cut expectations.
On Wednesday, Fed Governor Christopher J. Waller expressed support for additional interest rate cuts throughout the year, attempting to quell inflation concerns from impending tariffs proposed by incoming President Donald Trump. Despite this, investors' outlook on interest rates remained largely unchanged, as reflected in the CME FedWatch tool.
Meeting minutes released from the Fed's latest policy meeting revealed that most members acknowledged heightened inflation risks, and there exists concern that Trump's tariff stance could have broader effects on price levels than initially understood.
Upcoming Projections
In light of Wednesday's plunge, Bitcoin returns to the lower boundary of its recent trading range, suggesting a potential bounce in the coming days. However, price consolidation at lower levels may occur before any new record highs, according to the respected trader Bob Loukas, founder of Station3 NYC.
"Doesn't have to be overly bearish, but we might need to hover around a range and get more comfortable with $100k prints before we can move past this point," Loukas expressed in a recent post on X.
The trajectory of Bitcoin will be influenced by upcoming U.S. non-farm payroll data and the Fed meeting scheduled for later this month, as analysts from QCP predict a bounce as Trump’s inauguration on January 20 approaches.
"With market anticipation escalating, we suggest Bitcoin's pullback is just a pause, setting the foundation for a bullish rally fueled by optimism surrounding Trump's inauguration," said QCP analysts.
