Table of Contents
It was a volatile day for the cryptocurrency market on Wednesday with Bitcoin (BTC) dropping below $93k, almost erasing its Wednesday, early 2025 gains. Macroeconomic factors, rising yield on bonds, and market uncertainty pressured the sharp selloff across major altcoins along with some crypto-related stocks. However, they strongly recommend the short-term BTC recovery with the beginning of significant economic events.
Bitcoin’s Sharp Decline: A Two-Day Plunge
The benchmark crypto, bitcoin, declined to a session low of $9,260 25 in the U.S. trading session. This was a small dip to about $92,648 from a high of more than $102,576 on Monday. On Wednesday evening, Bitcoin briefly risen and was traded at $94,300 however, it was 2.5% down in the last 24 hours.
This decline erased most of the early 2025 gains for BTC, leaving the cryptocurrency’s price in the green by only 1% from the start of the year. It also saw huge liquidations in the crypto derivatives particularly longs, to the tune of about $1 billion as gleaned from CoinGlass.
Altcoins and Crypto Stocks Join the Decline
It was not just Bitcoin that was selling off; the most popular altcoins were experiencing significant declines in value. ADA was down nearly 4%, RNDR shed 7.44% and APT was back 4.29% on the day, leading the CoinDesk 20 Index down more than 3%.
Even stocks of companies with exposure to the crypto trade were not immune. Some of the companies that own bitcoin mines and engaging in this process – TeraWulf (WULF), Bit Digital (BTBT), Bitdeer (BTDR), Iris Energy (IREN), and Hut 8 (HUT) losing from 5% to 8%. Semler Scientific a medical devices firm that recently implemented a Bitcoin treasury strategy lost nearly 10% of its share value on Wednesday bringing its weekly loss to over 15%. MicroStrategy (MSTR), a firm that owns a large chunk of its balance sheet in Bitcoin, was down by 2.2%.
Macroeconomic Factors Fuel Selloff
The following macroeconomic factors played a role in causing the negative outlook towards the crypto market: Evidence of strong economic performance in the United States on Tuesday raised concerns about higher interest rates, inflation, and an aggressive Fed. Such aspects have over time acted as negative drivers to the attractiveness of relatively risky instruments such as cryptos.
Key contributors to the selloff included:
- Rising Bond Yields: The rate of interest on long-term US treasury increased and therefore stabilized traditional financial instruments concerning cryptocurrencies.
- Inflation Concerns: Sustained inflation did not help, along with concerns over Trump’s likely changes to fiscal policy affecting markets as well.
- Fed Policy Outlook: Recent Fed meeting minutes showed that members are worried about inflation possibility further reducing expectations of rate cuts.
Analysts Weigh In: A Consolidation Phase for Bitcoin?
Still, there is hope that analysts, for example, will be able to calculate Bitcoin and prognosticate its medium-term course soon. Cross-asset trader Bob Loukas wrote that Bitcoin has gone back to the lower border of the trading range that was set in late November. He said that it could range within this level before resuming the upside again beyond this level.
“Bitcoin doesn’t have to be overly bearish,” Loukas said in an X (formerly Twitter) post. “We might have to tweak between a range and get friendly with $100k prints before moving on from here.”
Key Events to Watch: Economic Data and Trump’s Inauguration
Market analysts are closely watching upcoming economic events that could influence Bitcoin’s trajectory:
- U.S. Non-Farm Payrolls Report: Out today, this report is expected to indicate the job market conditions for August and possibly the effect on the inflation rate and consequently Fed policies.
- Federal Reserve Meeting: This month’s policy decisions by the Fed will therefore be crucial in the direction of the market.
- Donald Trump’s Inauguration: There is now a risk that President-elect Trump’s policies especially about tariffs may well destabilize markets further. Expecting its inauguration on January 20, QCP hedge fund analysts predict a possible Bitcoin rise.
Crypto Market Resilience: A Pause Before the Next Rally?
Despite the current downturn in markets, the majority of investors consider the recent selloff as just a downward blip in the market rather than a long-term fall. The hedge fund referred to as QCP noted that Bitcoin has made a downward correction to pave the way for the bullish run. “In our view, speculative sentiment in the marketplace has risen as most expect another wave of buying after this consolidation phase is over reflecting optimism as Trump takes office,” QCP analysts said in a telegram.
A Volatile Start to 2025
The recent drop in bitcoin through the $93,000 level shows that investment in crypto assets is still characterized by high risks. Although, macroeconomic environment pressures and the increase in bond yields brought negative return in latest period, it is anticipated that fundamental tremendous economic factors will bring positive return in short term market. Investors continue to expect that as BTC is in a consolidation stage it will provide an avenue for the Bitcoin to touch the highs again.
As usual, one must remember that beyond the ever-shifting possibilities of digital trading, there are many uncertainties when it comes to cryptocurrencies.
