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The Bitcoin rally is waning in the final days of a record-setting year for the digital asset as investors reevaluate the residual momentum from President-elect Donald Trump's endorsement of the cryptocurrency sector, even as the Federal Reserve signalled a cautious 2025 rate action.
The token last changed hands below $94,000 on Monday, down about $14,000 from its record high of over $108,000 set on December 17.
The record-breaking year is coming to a close, and the momentum in the crypto trade lost its way in the final days of 2024. Some are wary of the largest digital asset by market cap, now that its price has dropped near its 50-day moving average.
The speculative fervour caused by Trump's call for loosened crypto rules in the US has been dampened by the prospect of slower interest-rate cuts by the Federal Reserve in 2025, which is reflected in Bitcoin's retreat.
Trump supports the idea of a national Bitcoin reserve and is following through on his pledge to make the United States more crypto-friendly.
Investors are, however, waiting to see if the proposed reserve is practical before taking a portion of the gains generated by the so-called Trump trade since the election results early in November.
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The token is poised for its first monthly drop in four as the OG token has lost momentum at the end of a chart-bursting, record-breaking rally year.
Bitcoin looks shaky even as MicroStrategy hinted at the prospect of buying more for its treasury.
In a dramatic shift from software developer to Bitcoin accumulator, the firm is now worth over $40 billion as the OG token repeatedly surged to new record highs. MicroStrategy disclosed the acquisition of an additional $561 million in Bitcoin at an average price close to the token's peak.
This represented the seventh consecutive week of acquisitions for the software company from the dot-com era, which has transformed into a leveraged Bitcoin proxy.
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The twelve US spot-Bitcoin exchange-traded funds saw the largest outflow of $1.5 billion from investors in the four trading days ending December 24, marking the biggest outflow since Trump's US election victory on November 5.
Still, net inflows of $475 million into Bitcoin ETFs towards the end of last week broke that trend.
In the current 'Trump trade' play, though, Bitcoin ETFs have received $12 billion in net inflows since Trump's win despite the recent slowdown in investment activity.
The biggest digital asset has outperformed more conventional investments like global equities and gold, with a 125 per cent rally so far this year.
There has been a doubling of a broader crypto market indicator that includes smaller assets like Dogecoin and Ether, favourites among meme crowds.
This year, the digital industry's surge was largely driven by large institutional investors' broader adoption of cryptos, the launch of ETFs, and the Fed's rate-cut cycle.
But, with the Fed concerned about a reversal in inflationary pressures from Trump's trade policies, the central bank's view on easing has turned somewhat hawkish.
Validation Comfort for Bitcoin Bets
Some of the recent investors dived headfirst into cryptocurrency just before it all crashed. It had all the makings of a disastrous move not long ago.
FTX ended its run. Bitcoin's price fell sharply below $16,000. Everyone they knew, even their loved ones and former coworkers, seemed to agree that they had made a huge mistake.
However, they were comforted, and Bitcoin's enormous surge validated their bets.
For individuals who bravely abandoned lucrative Wall Street positions for cryptocurrency and made it through, Donald Trump's triumph in November sent prices soaring.
Companies in the blockchain business are hiring again, investors are investing in new ventures, and the sector as a whole is thriving.
Many people who used to work on Wall Street are feeling better about their employment choices now that crypto has become mainstream.
More institutional capital entered the cryptocurrency market with the introduction of exchange-traded funds (ETFs) earlier this year, making it simpler for regular mom-and-pop investors to invest in the industry.
Wall Street has unmistakably left its mark on the industry thanks to new providers like BlackRock, Invesco, and Fidelity Investments.
Expecting a less restrictive approach from the new Trump administration and a wider risk-taking attitude, Bitcoin soared beyond $100,000 earlier in December, breaking prior milestones.
While prices have fallen since then, they are still over 500% higher than their bottom in 2022.
The recent decline in cryptocurrency momentum aligns with a decline in broader risk assets, such as global stock markets, which had experienced significant growth this year.
Stocks were battered in the last few days of a fantastic year from a selloff in the world's biggest tech giants.
Holiday-driven thin trading volumes are exaggerating moves and weighing on the price action of assets overall.
The S&P 500 slumped over 1%, and the Nasdaq 100 crashed 1.4% in another session of low trading activity, which makes price movements more noticeable.
Tech megacaps experienced significant losses on Friday, while every other major sector also experienced declines.
This follows a wild run in which the so-called "Magnificent Seven" were responsible for almost 50% of the 2024 gains in the Wall Street benchmarks.
The Santa rally has fizzled, and analysts warn against making any strong investment decision in another holiday-shortened light trading volume week.
Data from EPFR shows that funds associated with numerous key topics that have influenced performance and inflows over the last three years experienced difficulties last week. Funds specializing in technology saw their largest outflow since the first week of 2023, while redemptions from cryptocurrency funds reached a record high.
The US stock market's strong performance this year has raised investors' expectations to a level where they may prove to be the greatest obstacle to additional increases in the coming year.
The bar is considerably higher, with tech stocks experiencing a 70% meteoric rise in 2024.
Analysts have pointed out that the current boom, which began in 2022 and continues, has been the second-shortest bull market with the second-smallest cumulative gains since 1928, making it seem exceptional.
There has been a 38-month historical average for late-cycle bull markets with premium valuations at the two-year mark.
The S&P 500 is set for a record-breaking year, with annual returns poised for its best since 2021.
Elsewhere
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Blockcast
In this episode, host Takatoshi Shibayama speaks to Kain Warwick, founder of Infinex, and a renowned figure in the DeFi space, known for his work on the Synthetix protocol.
Warwick argues that the current crypto landscape, dominated by centralized exchanges, is unsustainable and hinders innovation. He outlines Infinex's vision to create a decentralized platform that rivals the convenience and accessibility of centralized exchanges while offering superior functionality and empowering users with true self-custody.
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Previous episodes of Blockcast can be found on Podpage, with guests like Peter Hui (Moongate), Luca Prosperi (M^0), Charles Hoskinson (Cardano), Aneirin Flynn (Failsafe), and Yat Siu (Animoca Brands) on our most recent shows.
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