The cryptocurrency market experienced heightened volatility as a wave of selling pressure gripped digital assets, marking one of the most significant declines of 2024, Bloomberg reports.
Bitcoin, the world’s largest cryptocurrency, fell below $95,000 on Tuesday after recently hitting a record high of $103,800 on December 5.
An index tracking smaller digital assets slid by as much as 15%, its steepest intraday drop this year. The broader crypto market lost roughly $150 billion in market value within a 24-hour period, according to data from CoinGecko.
The downturn follows a period of euphoria that began after the US presidential election on November 5. Speculators had piled into crypto assets, spurred by President-elect Donald Trump’s public embrace of the sector. His administration promised a supportive regulatory environment and proposed the controversial idea of establishing a US Bitcoin reserve.
Trump’s pivot from crypto skepticism to full-throated support for the industry marked a major shift. He has since appointed a pro-crypto figure to lead the US Securities and Exchange Commission (SEC) and created a new White House role dedicated to overseeing artificial intelligence and digital assets.
Institutional moves further fueled the market rally. Business intelligence firm MicroStrategy, a longtime Bitcoin advocate, announced a $2.1 billion purchase of the cryptocurrency, while US spot Bitcoin exchange-traded funds (ETFs) saw inflows of approximately $10 billion since Trump was declared president-elect.
However, the sharp drop in Bitcoin’s price and the broader crypto market’s sell-off suggest that traders may be locking in profits or positioning themselves more defensively. Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors, described the market activity as a sign of “deleveraging across the crypto ecosystem.”
He noted that caution could be setting in ahead of the release of US inflation data on Wednesday, which may influence expectations for Federal Reserve interest rate decisions. If inflation remains elevated, the Fed could delay rate cuts, which may affect risk assets like cryptocurrencies.
Bitcoin’s struggle to maintain a foothold above the $100,000 mark has been a key focus for analysts. Katie Stockton, a technical analyst at Fairlead Strategies LLC, advised a “neutral short-term bias” for Bitcoin, highlighting its inability to hold the key psychological threshold.
The market’s volatility reflects the unpredictable nature of cryptocurrencies, where price swings are often triggered by sentiment, macroeconomic factors, and regulatory developments. Smaller tokens, including Ether and Dogecoin, posted mixed performances, underscoring the fragmented reaction across the sector.
The recent turbulence underscores the risks associated with mainstream adoption of cryptocurrencies. While some view Trump’s pro-crypto stance as a catalyst for a boom, critics argue that wider acceptance may bring greater regulatory scrutiny, systemic risks, and speculative excess.
If Trump’s proposed regulatory overhaul materializes, it could lead to significant changes in how digital assets are governed in the US For now, however, the uncertainty around Federal Reserve policy and the potential for profit-taking are driving market sentiment.
The next key milestone for traders will be the US inflation report, which could sway the outlook for risk assets, including cryptocurrencies. Until then, crypto markets remain on edge, with Bitcoin trading at approximately $97,990 as of 9:47 a.m. in Singapore.
