- Bitcoin is down 13% since peaking at $108,000 two weeks ago.
- Cryptocurrency trading volume plunged to a seven-week low.
- Analysts have identified important factors driving the crypto market.
When Bitcoin surpassed $100,000 in December, analysts predicted much higher milestones to come.
They did not materialize.
Instead, Bitcoin skidded 13% from its high of $108,135 two weeks ago.
Sober analysts now say market sentiment has muted, with cryptocurrency trading volume falling 64% to a seven-week low.
This does not mean the bull market is over.
No exceptions
“The current low volume and erratic price action are not atypical for year-end across all asset classes, crypto is no exception,” said Ed Hindi, chief investment officer at the asset manager. Tyr Capital investment. DL News.
“This is a short-term correction that is expected to be quickly reversed in the first quarter of 2025,” Hindi said.
Not everyone agrees with this position.
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BitMEX founder Arthur Hayes has turned bearish again.
In his latest macroeconomic forecast, Hayes said there was a disconnect between crypto investors’ expectations and what was going to happen during President-elect Donald Trump’s second term in the White House.
“The market will instantly wake up to the fact that Trump has at best a year to enact a policy change around January 20,” Hayes wrote on his blog.
“This awareness will drive a crypto sell-off and other Trump 2.0 stock trading.”
“This recent decline is a healthy continuation of Bitcoin’s broader rally.”
— Illia Otychenko, CEX.io
Again, Illia Otychenko, lead analyst at crypto exchange CEX.io, said DL News that the current decline is typical for Bitcoin.
“This recent decline is a healthy continuation of the broader Bitcoin rally,” Otychenko said.
“The sustainability of the rally would be more questionable without such a correction (and) double-digit declines are natural during post-Bitcoin halving bull runs.”
Warmongering pivot
Shortly after Bitcoin peaked above $108,000, U.S. Federal Reserve Chairman Jerome Powell spooked investors by saying the Fed plans to cut interest rates less this year next.
Otychenko said the Fed’s updated rate cut forecast served as a trigger for the crypto market correction.
“(It) left a bitter aftertaste to the year and provided the long-awaited catalyst for a market pullback,” Otychenko said. DL News.
The market responded by erasing most of its December gains and has remained volatile since.
Hindi said the Fed’s apparent hawkish turn had slowed the bullish momentum in risk assets such as Bitcoin and other cryptocurrencies.
“Long-term Bitcoin holders used this as an excuse to take partial profits,” Hindi said.
The Fed Chairman’s speech may not be the only determining factor.
Market analysts have also cited tax-loss harvesting as one of the reasons for the recent market slide.
Investors use tax-loss harvesting as a safe harbor plan by using huge investment losses to offset capital gains taxes.
Bull Market 2025
Despite these risk factors, market observers are still betting on the continuation of the bull market in Bitcoin and cryptocurrencies.
On-chain data from crypto analytics provider CryptoQuants shows a massive increase in Bitcoin accumulation by whales – wallet entities owning at least 1,000 Bitcoins.
Additionally, CryptoQuant analysts also note that Bitcoin flows to exchanges have fallen to their lowest level since 2016.
Meanwhile, stablecoin volume on Binance, the largest crypto exchange, reached a new all-time high of $31 billion.
“An increase in stablecoin reserves generally signals that buying pressure is increasing (and) that investors remain actively positioned in the market,” CryptoQuant analysts said.
Crypto market players
- Bitcoin rose 0.7% over the past 24 hours to $94,078.
- Ethereum is down 0.3% over the same period at $3,389.
What we read
Osato Avan-Nomayo is our DeFi correspondent based in Nigeria. It covers DeFi and technology. Do you have any advice? Please contact him at osato@dlnews.com.
