Bitcoin (BTC) experienced a sharp selloff this week, erasing much of its early-2025 gains. The largest cryptocurrency dropped to a low of $92,600 during U.S. trading hours, marking a nearly 10% loss from its Monday peak above $102,000. However, Bitcoin has since recovered somewhat, trading at $94,300, still down 2.5% over the past 24 hours.
The Broader Crypto Market Selloff
The pullback wasn’t limited to Bitcoin. Several other altcoins, including Cardano (ADA), Render (RNDR), and Aptos (APT), led the losses in the CoinDesk 20 Index, which dropped more than 3% over the same period.
The selloff triggered a liquidation of nearly $1 billion worth of leveraged derivatives positions, primarily from traders who had taken long positions, betting on rising prices. The sharp drop also pushed Bitcoin below where it started the year, although it was still up about 1% from its January 1 opening.
Impact on Crypto-Related Stocks
The decline in crypto prices also affected stocks tied to the crypto industry. Bitcoin miners such as TeraWulf (WULF), Bit Digital (BTBT), Bitdeer (BTDR), IREN (IREN), and Hut 8 (HUT) saw declines between 5% and 8%. Stocks like Semler Scientific, which adopted a Bitcoin treasury strategy, also took a hit, down nearly 10% for the day and roughly 40% from its high in late December. Even MicroStrategy (MSTR), a well-known Bitcoin holder, dropped by 2.2%.
Macro Concerns and the Fed’s Influence
Several analysts have warned that January 2025 could be a volatile month for crypto, with potential macroeconomic headwinds on the horizon. Factors such as a hawkish Federal Reserve, rising long-term government bond yields, sticky inflation, and the possibility of a U.S. government shutdown are weighing on investor sentiment. The recent strong U.S. economic data releases sparked a retreat from rate cut expectations, adding to the pressure on risk assets like Bitcoin.
On Wednesday, Fed Governor Christopher J. Waller supported further rate cuts, which somewhat alleviated inflation fears tied to potential tariffs from incoming President Donald Trump. However, this didn’t significantly alter the market’s rate outlook, as shown by the CME FedWatch tool.
Fed Minutes Show Inflation Concerns
The Fed’s meeting minutes released Wednesday afternoon revealed that policymakers are increasingly concerned about inflation risks. There is particular worry about the potential effects of incoming tariff policies under President Trump, which could impact price levels more than previously assumed.
Will Bitcoin Bounce Back?
Despite the recent drop, some traders remain optimistic about Bitcoin’s short-term outlook. Bitcoin is now trading near the lower end of its range that has held since late November. Bob Loukas, a well-followed cross-asset trader and founder of Station3 NYC, believes Bitcoin could experience a bounce in the coming days. However, he expects the cryptocurrency to remain rangebound for a while before making a run at new all-time highs.
Loukas stated on X (formerly Twitter): “Doesn’t have to be uber bearish, but we might need to fiddle around in a range and get more comfortable with $100k prints before we can really leave this area behind.”
What’s Next for Bitcoin?
The trajectory of Bitcoin will likely depend on the upcoming U.S. non-farm payrolls report on Friday, as well as the Fed meeting later this month. QCP Capital, a hedge fund, believes that Bitcoin’s recent pullback is only temporary and sets the stage for a bullish rally as the market anticipates Trump’s inauguration on January 20.
In summary, while Bitcoin and the broader crypto market are facing short-term volatility due to macroeconomic factors, analysts expect a bounce in Bitcoin’s price as positive market sentiment builds.
Related topics:
