Bitcoin (BTC) became very volatile on Tuesday, falling 4.8% to $97,000 again after briefly rising above $100,000 to start the week.
Major crypto stocks, including Coinbase and MicroStrategy, also saw sharp declines, falling more than 7% and 9%, respectively. Bitcoin mining companies The likes of Mara Holdings and Core Scientific weren't spared either, each falling around 5%.
Bitcoin prices fall amid rising financial yields and economic concerns
According to recently reportsthe decline in the price of Bitcoin coincided with a sudden spike in the 10-year US Treasury yield. This increase followed data from the Institute for Supply Management (ISM), which indicated faster-than-expected growth in the US services sector for December.
This news has raised concerns about continued inflation, which tends to weigh on growth-oriented risk assets such as cryptocurrencies. Historically, rising Treasury yields have had an inverse relationship with risk assets such as Bitcoin.
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On Monday, Bitcoin was trading above $102,000 and is widely expected to double this year, in line with clearer regulations that could strengthen it. digital asset prices. However, uncertainty about the Federal Reserve's (Fed) interest rate cuts is a potential challenge for Bitcoin's price.
In December, the Fed indicated that although it was cutting rates for the third time, the pace of future cuts may be slower than investors had hoped. Rate cuts usually support Bitcoin prices, but increases tend to bring downward pressure.
Analysts also attribute the recent decline not only to an increase in yields but also to growing correlations between Bitcoin and traditional equities, especially the Nasdaq.
Bob Wallden, head of trading at digital asset firm Abra, noted that the ISM data fueled a sell-off in shares that entered the crypto market.
Wallden suggests that this decline was exacerbated by bring profit and stop-loss incentives for traders who had gone long on Bitcoin above the $100,000 mark.
Adding to the market volatility are renewed headlines regarding President-elect Donald Trump's shifting position on tariff negotiations, which has fueled more cautious sentiment in the Bitcoin market.
Investors cash in as 2024 boom fades
Bitcoin's successful 2024 rally began to lose momentum in late December, as investors took advantage of their profits. Optimism about a pro-crypto administration under Trump had previously driven Bitcoin to a high of $108,000 in December.
But, Bloomberg reports that cryptocurrency prospects for 2025 will largely depend on whether Trump follows through on his cryptocurrency promises, including the establishment of a national Bitcoin stockpile.
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Despite the hope, there is still skepticism. A recent MLIV Pulse survey revealed that 39% of respondents believe that Bitcoin, once a successful investment in 2024, is more likely to be a losing investment in 2025, the highest percentage among various assets that have been investigated.
Against this background, market analysts like Ali Martinez have supported Bitcoin at around $97,000, with the TD Sequential indicator mark opportunity to buy on the card per hour.
If this support level holds, there may be a rebound. However, Martinez says that a break below the $97,000 price level could signal a possible decline all the way down to the $92,000 support.
Featured image from DALL-E, chart from TradingView.com
