Crypto Market Falls By 3%, How Soon Will It Recover?

This week, the cryptocurrency market has been marked by subdued trading, with a 3% dip today. Major players like Bitcoin and leading altcoins have experienced a considerable drawback. This current downturn suggests investors are hesitant due to the lack of powerful catalysts capable of boosting their confidence. Nevertheless, some analysts predict that such declines are common during the upward trend of these assets.

Why Is the Crypto Market Falling Today?

Although the crypto market has experienced a pullback lately, many experts view this as a good time to buy. This trend suggests that traders remain optimistic about the sector in the long term, particularly given the increasing interest of global investors in digital assets. Let’s delve into the possible causes behind the recent downturn and estimate when the market might bounce back.

US Fed’s FOMC Minutes Fuels Concern

The most recent Federal Open Market Committee (FOMC) minutes from the December meeting seem to have influenced financial market opinions negatively, and even more so in the crypto sector. Specifically, the latest FOMC statement implies that the U.S. Federal Reserve will be taking a more deliberate approach to reducing interest rates this year due to uncertainties surrounding President Donald Trump’s policies.

The FOMC meeting summary suggested worries over inflation and the possible economic consequences stemming from certain U.S. government policies. However, the minutes themselves did not directly reference these policies; instead, they hinted at a careful approach to adjusting interest rates in the future.

Consequently, the Federal Reserve adjusted its forecast for potential rate cuts in 2025 from four to two reductions, assuming each cut would be of a quarter-point. This more conservative stance has stirred apprehension among investors, contributing to the ongoing market downturn. It’s worth noting that a similar selloff occurred last month following remarks from Fed Chair Jerome Powell suggesting a similar policy shift.

Robust US Jobs Data

According to the latest employment report from the U.S. Labor Department, the job market continues to thrive, solidifying expectations for a possible more aggressive monetary policy by the Federal Reserve. The JOLTS job openings figure was 8.1 million as of November 30th, 2024.

A robust job market would allow the U.S. Federal Reserve more flexibility to implement stricter monetary policies. Furthermore, the ISM Non-Manufacturing Index suggests that the American economy is thriving, demonstrating its resilience even amidst increased interest rates set by the Fed. This decision seems to have influenced global financial market sentiment negatively, which may explain the recent decline in the cryptocurrency market.

US Govt’s BTC Dump In Focus

Beyond the broader economic issues, the recent sale of Bitcoin by the U.S. government has added to the market’s downward trend. To provide some background, the U.S. government sold 69,370 BTC valued at approximately $6.7 billion, which it had seized from the Silk Road marketplace. This action has negatively affected traders’ outlook on the market.

The proper timing of the event is crucial too. The Department of Justice approved this action right before Donald Trump’s inauguration as President. Additionally, the Trump administration had announced plans for a Bitcoin Strategic Reserve in the past, causing a significant market surge. However, this latest move seems to have added to investors’ pessimism today.

Contrary to some assertions, CryptoQuant CEO Ki Young Ju has challenged the notion that the US Government’s sale significantly influenced Bitcoin’s price. In a recent post, he emphasized approximately $379 billion entering the market last year, which equates to around $1 billion per day. Furthermore, he advised investors not to worry because the reported $6.5 billion sell-off “might be easily absorbed within a week.

A CoinGape analysis recently delved into the reasons behind Bitcoin’s price drop following its momentary surge to around $102,000.

Crypto Market Slips

During the time of writing, the total value of the global cryptocurrency market dropped by approximately 2.67%, settling at around $3.28 trillion. The overall trading volume also decreased by about 12%, amounting to $162.27 billion. Simultaneously, the price of Bitcoin dipped more than 2.3% and fell below $94K, whereas Ethereum‘s price declined by 1.2%, reaching $3,318.

Similar cryptocurrencies such as Solana, Dogecoin, and Cardano experienced a decline of between 3% and 7%, demonstrating significant selling pressure within the market. At the same time, the overall crypto market has seen approximately $483.73 million worth of liquidations over the past 24 hours.

Crypto Market Recovery Soon?

In more casual terms: Due to the ups and downs in the current cryptocurrency market, many investors have chosen to wait it out. However, Robert Kiyosaki, best known for writing “Rich Dad Poor Dad,” remains positive about the future of this market, particularly Bitcoin. He believes that the recent drop in prices offers a great chance for investors to buy at a lower cost, showing his confidence in the long-term success of cryptocurrencies.

In a manner mirroring his sentiments, President Nayib Bukele of El Salvador suggested potential Bitcoin acquisitions during this gathering. Consequently, it seems that the market is poised for a robust rebound, with Bitcoin likely to take the lead.

As an analyst, I’ve observed that Bitcoin holds significant influence over the wider digital asset market, with most top altcoins mirroring Bitcoin’s trends. Consequently, a recovery in Bitcoin could positively impact the overall market sentiment. Furthermore, the forthcoming inauguration of Donald Trump could potentially serve as a significant catalyst, increasing investor confidence.

Trump has openly expressed his backing for the digital assets sector and has even promised to establish the U.S. as a leading hub for cryptocurrencies. Furthermore, he hinted at the creation of a Strategic Reserve for Bitcoin within the United States. Given this context, there could be a significant market rebound with Trump’s inauguration as president in focus.

2025-01-09 13:10