Bitcoin experienced its first weekly decline since the U.S. presidential election of 2024, as investors recalibrated their expectations following the Federal Reserve’s more cautious stance on monetary policy. The largest cryptocurrency by market capitalization saw a drop of over 7% in the seven-day period ending on Monday morning in Singapore. This marked the steepest decline since September, reflecting the broader uncertainty in the market.
The downturn in Bitcoin’s price followed a series of moves by the U.S. Federal Reserve, which on Wednesday enacted a third consecutive interest rate cut. However, the central bank also signaled a shift towards a more gradual pace of monetary easing in the coming year to curb inflation, a decision that rattled global markets and dampened investor enthusiasm. This hawkish tone stands in stark contrast to the optimism that had been building in the cryptocurrency space, especially after President Donald Trump’s vocal support for pro-crypto policies, including the creation of a national Bitcoin stockpile.
For the seven-day period through 9:27 a.m. Monday, Bitcoin’s price stood at approximately $94,344, marking a significant drop of nearly $14,000 from its peak of $108,000 on December 17, 2024. Despite the decline, Bitcoin is still up nearly 37% since the U.S. presidential election on November 5, 2024, underscoring the volatility that has characterized its recent price movements.
A broader gauge of the cryptocurrency market, which includes smaller tokens like ether and the meme-favorite dogecoin, saw an even more pronounced decline, with prices falling by about 10% during the same period. This pullback suggests that investor sentiment has turned cautious across the market, possibly due to the dual impact of the Federal Reserve’s actions and profit-taking among traders.
One of the factors contributing to the recent pullback in Bitcoin’s price was a significant outflow from U.S. exchange-traded funds (ETFs) that directly invest in Bitcoin. Data from the previous week shows record outflows from these funds, which have been a popular investment vehicle for those looking to gain exposure to Bitcoin without holding the cryptocurrency directly.
Sean McNulty, Director of Trading at Arbelos Markets, warned that these outflows are likely to exert continued pressure on Bitcoin’s price in the near term. “We should hold the $90,000 level for Bitcoin into the year’s end,” McNulty stated. “However, if we break below that, it could trigger further liquidations, leading to even greater downward pressure.”
In response to market uncertainty, investors have been hedging their positions, particularly in the options market. Last week, there was a notable increase in the buying of puts with strike prices in the range of $75,000 to $80,000 for options expiring in January, February, and March 2025. This surge in bearish sentiment suggests that many traders are preparing for the possibility of further price declines.
Despite the recent drop, David Lawant, Head of Research at FalconX, remains optimistic about Bitcoin’s long-term prospects. In a note to clients, Lawant suggested that while Bitcoin may face continued choppy price action as the year draws to a close, a “bullish trajectory” remains the most likely scenario for the first quarter of 2025. He noted that a low-liquidity environment during the holiday season could contribute to heightened volatility in the short term.
In particular, Lawant pointed to the upcoming options expiry event on December 27, 2024, which is expected to be the largest in the history of the cryptocurrency market. This event could lead to significant price movements, especially if large institutional players or traders with significant open positions are forced to adjust their strategies.
As always, market participants are closely watching MicroStrategy, the business intelligence firm led by Michael Saylor, which has been one of the most prominent institutional buyers of Bitcoin. MicroStrategy’s weekly purchases of Bitcoin have made it one of the largest corporate holders of the cryptocurrency. Traders are speculating that if MicroStrategy continues its buying spree, it could trigger the next price move for Bitcoin.
As of this week, MicroStrategy’s holdings stand at more than 124,000 Bitcoins, a significant portion of the total Bitcoin supply. The company’s decision to continue accumulating Bitcoin is seen as a vote of confidence in the cryptocurrency’s long-term value, especially as it faces competition from other institutional players entering the market.
Traders believe that if MicroStrategy continues to add to its position on Monday, this could act as a catalyst for a potential price breakout or at least stabilize the current downward trend. However, with Bitcoin facing headwinds from both market sentiment and policy uncertainty, it remains unclear whether this will be enough to overcome the broader market challenges.
Looking ahead, Bitcoin’s trajectory will likely depend on a number of key factors, including the Federal Reserve’s next moves, the broader economic environment, and the actions of institutional investors like MicroStrategy. While the cryptocurrency has shown resilience in the face of significant volatility, the recent price dip underscores the challenges that still lie ahead.
For now, traders will be focusing on the $90,000 price level as a potential support zone. If Bitcoin fails to maintain this level, it could signal a deeper correction, potentially testing lower levels in the coming weeks. On the other hand, if Bitcoin manages to hold steady, it could build momentum for a potential rally as we move into 2025, especially if the market begins to digest the implications of the U.S. government’s stance on cryptocurrency and the broader regulatory environment.
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