The price of Bitcoin recently rose to a record high of $108,000, but has since fallen significantly, leaving investors wondering what caused the sudden drop. Although the earlier rally cheered the market, several factors are now contributing to the downward trend.
If Bitcoin does not break through its resistance level, it could fall further to around $95,000.
Implications of the Fed's Interest Rate Decision
One major reason for the Bitcoin price decline is the upcoming interest rate decision by the US Federal Reserve. Coinpedia News reports that there is a 96% chance that the Fed will cut rates by 25 basis points. However, there are concerns about how the Fed will handle inflation moving forward.
Inflation reached 2.8% in November, and Fed Chairman Jerome Powell's comments on the 2025 rate forecast are attracting attention. If the Fed cuts rates higher than expected in 2025, it could put significant pressure on the market.
Money Traders in their Profits
Another factor contributing to Bitcoin's price drop is the wave of selling by short-term holders. Many traders who recently bought Bitcoin are now selling them to lock in their profits after the rally. This type of selling is common when prices hit new highs, as traders try to take profits.
Long-term holders, who bought Bitcoin when it was trading between $90,000 and $100,000, are largely staying inactive. They may be waiting for more stable market conditions before deciding to act.
Bitcoin is right – but don't worry!
Bitcoin price cycles in the past show that corrections are a natural part of its growth. In its previous all-time highs, Bitcoin has experienced a pullback of up to 34%. These short-term drops can wipe out weeks of gains, but are considered a normal part of how the market behaves.
Analysts believe that this correction could temporarily push Bitcoin below $100,000 before it stops.
What's next for the price of Bitcoin?
Currently, Bitcoin is trading around $104,000, marking a decline of 2.93% in the past 24 hours. To maintain the upward trend, Bitcoin must turn this new price level into strong support. If it does, the price could rise past the expected $110,000 mark.
However, if Bitcoin struggles to break above this resistance and hold its position, it could face further declines, possibly pulling back to its next major support level at $95,651.
With so many factors involved, the next move for Bitcoin could reshape its path for the rest of the year – and 2025!
