What to know:
- Bitcoin dropped nearly 10% in two days, erasing nearly all its early 2025 gains, while Cardano‘s ADA, Render’s RNDR and Aptos’ APT led losses in the CoinDesk 20 Index.
- Strong U.S. economic data, surging bond yields, and concerns about inflation and a hawkish Federal Reserve drove the risk-off sentiment, exacerbated by uncertainty around President-elect Trump’s tariff policies.
- Analysts suggest Bitcoin may consolidate before resuming its upward trajectory, with economic data releases and Donald Trump’s upcoming inauguration likely influencing its trajectory.
On Wednesday, Bitcoin (BTC) wiped out its gains from early-2025 due to heightened economic concerns and the rapid decline in global bond markets, causing a downward trend in cryptocurrency values.
During U.S. trading hours today, the largest cryptocurrency dipped to a low of $92,600, representing a roughly 10% drop from its high on Monday over $102,000. Although it has regained some ground, it currently trades at $94,300, marking a 2.5% decrease in the last 24 hours.
In the CoinDesk 20 Index, which experienced a decline of more than 3%, Cardano’s ADA, Render’s RNDR, and Aptos’ APT were among the cryptocurrencies that suffered losses during the specified timeframe.
As a researcher studying the cryptocurrency market, I’ve observed a significant drop in value over the past two days that liquidated approximately $1 billion worth of leveraged derivative positions in various crypto assets. This decline primarily affected long positions speculating on rising prices, as data from CoinGlass indicates. The downslide even momentarily dipped Bitcoin below its starting point for the year. However, despite this setback, at the current price, Bitcoin has managed to climb 1% from its New Year’s Day opening value.
crypto-linked stocks experienced a setback. Bitcoin miners such as TeraWulf (WULF), Bit Digital (BTBT), Bitdeer (BTDR), IREN (IREN) and Hut 8 (HUT) saw declines of 5% to 8%. Semler Scientific, a company that follows a Bitcoin treasury strategy similar to MicroStrategy’s, dropped almost 10% during the day and has now declined more than 15% for the week. It is also currently about 40% lower than its late December peak. On Wednesday, MicroStrategy (MSTR) decreased by 2.2%.
Multiple financial experts cautioned crypto investors about a risky start to January, predicting troubles ahead for risk investments due to several potential threats such as a more aggressive Federal Reserve stance, rapidly increasing long-term government bond yields, stubborn inflation figures, and the possibility of a U.S. federal government shutdown. The initial trigger for the decline across all assets seemed to be Tuesday’s robust U.S. economic reports that caused investors to lower their expectations for interest rate cuts throughout the year.
On Wednesdays remarks, Federal Reserve Governor Christopher J. Waller expressed support for lowering interest rates more throughout the year, easing concerns about inflation caused by tariffs proposed by President Donald Trump. However, this didn’t significantly alter investors’ expectations regarding interest rates, as indicated by the CME FedWatch tool.
On Wednesday afternoon (U.S. time), minutes from the Federal Reserve’s latest policy meeting were made public, revealing that many members felt the potential for inflation to exceed expectations had grown. Additionally, there were indications of concern that President Trump’s tariff policies might have a greater impact on prices than initially anticipated.
Bitcoin bounce incoming?
As an analyst, I’ve observed that after Wednesday’s decline, bitcoin has retreated to the bottom end of its trading range which it has maintained since late November. In the coming days, I anticipate a rebound from these lows, but the price action might continue to consolidate within this range and potentially dip lower before reaching new record highs, as suggested by Bob Loukas, a widely respected cross-asset trader and founder of Station3 NYC.
He suggested that while it doesn’t necessarily require an extremely negative outlook, we may need to adjust within a certain price range and grow accustomed to seeing the $100,000 level on our screens before we feel confident enough to move away from this area, as expressed in a post on X.
The upcoming reports on U.S. non-farm payrolls this Friday and the Federal Reserve meeting later this month are expected to impact Bitcoin’s course, according to hedge fund QCP in their recent broadcast. They predict a potential increase as we get closer to President Trump’s inauguration on January 20.
As excitement grows within the market, our analysis suggests that Bitcoin’s current dip is just a momentary halt, paving the way for an uptrend, driven by increased optimism following Donald Trump’s inauguration. This is according to QCP analysts’ perspective.
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2025-01-08 22:41