- Bitcoin is down 13% since peaking at $108,000 two weeks ago.
- Crypto exchange volume has plunged to a seven-week low.
- Analysts identified important factors driving the crypto market.
When Bitcoin leapt past $100,000 in December, analysts predicted much higher milestones to come.
Instead, Bitcoin has skidded 13% from its peak of $108,135 two weeks ago.
Sobered analysts now say market sentiment has become muted as crypto trading volume has slumped 64% to a seven-week low.
This doesn’t mean the bull market is over.
No exception
“The current low volume and erratic price action is not atypical of year ends across asset classes, crypto is no exception,” Ed Hindi, chief investment officer at investment manager Tyr Capital, told DL News.
“This is a short-term correction that should be quickly reversed in the first quarter of 2025,” Hindi said.
Not everyone agrees with that position.
BitMEX founder Arthur Hayes has flipped bearish once again.
In his latest macroeconomic forecast, Hayes said there is a misalignment between crypto investor expectations and what’s to come in President-elect Donald Trump’s second term in the White House.
“The market will instantly wake up to the reality that Trump has at best one year to enact any policy change on or around January 20th,” Hayes wrote in his blog.
“This realisation will lead to a vicious sell-off in crypto and other Trump 2.0 equity trades.”
‘This recent dip serves as a healthy continuation of Bitcoin’s broader rally.’
— Illia Otychenko, CEX.io
Then again, Illia Otychenko, lead analyst at crypto exchange CEX.io told DL News that the current dip is typical for Bitcoin.
“This recent dip serves as a healthy continuation of Bitcoin’s broader rally,” Otychenko said.
“The sustainability of the rally would be more questionable without such a correction [and] double-digit dips are natural during Bitcoin’s post-halving bull runs.”
Hawkish pivot
Shortly after Bitcoin peaked above $108,000, the US Federal Reserve Chair Jerome Powell spooked investors by saying the Fed was mulling fewer interest rate cuts next year.
Otychenko said the Fed’s updated rate cut projection provided a trigger for the crypto market correction.
“[It] left a bitter aftertaste for the year and provided the long-awaited catalyst for a market pullback,” Otychenko told DL News.
The market reacted by erasing most of its December gains and has been volatile ever since.
Hindi said the Fed’s apparent hawkish pivot slowed the upside momentum for risk-on assets such as Bitcoin and other cryptocurrencies.
“Long-term Bitcoin holders used that as an excuse to take partial profits,” Hindi said.
The Fed chair’s speech may not be the only driver.
Market analysts also cited tax loss harvesting as a reason for the recent market slide.
Investors use tax loss harvesting as a safe harbour plan by using huge investment losses to offset capital gains taxes.
2025 bull market
Despite these risk factors, market observers still bet on the continuation of the bull market for Bitcoin and cryptocurrencies.
On-chain data from crypto analytics provider CryptoQuants shows a massive increase in Bitcoin accumulation by whales ― wallet entities that own at least 1,000 Bitcoin.
What’s more CryptoQuant analysts also note Bitcoin inflows to exchanges have dropped to their lowest level since 2016.
Meanwhile, stablecoin volume on Binance, crypto’s biggest exchange’ has risen to a new all-time high of $31 billion.
“An increase in stablecoin reserve typically signals that buying pressure is growing [and] that investors remain actively positioned in the market,” CryptoQuant analysts said.
Crypto market movers
- Bitcoin has ticked up 0.7% over the past 24 hours to reach $94,078.
- Ethereum is down 0.3% over the same period to $3,389.
What we’re reading
- Satoshi, $100,000 Bitcoin, and burning eyeballs: Our favourite stories of 2024 ― DL News
- Milk Road’s 2025 predictions ― Milk Road
- 1.6 Trillion BONK Tokens Worth $53.5 Million to Be Burned as Part of BURNmas ― Unchained
- What you missed this week ― Milk Road
- Revolut, Robinhood and five other firms on what’s next for crypto in 2025 ― DL News
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
