Crypto Market Shifts Gears as Bitcoin’s Record Run Hits a Speed Bump
The digital asset landscape has undergone a significant transformation in recent weeks, with Bitcoin’s unprecedented surge finally showing signs of fatigue. After reaching an all-time high of $108,315 in mid-December, the cryptocurrency’s value dropped 3.2% last month, marking its first monthly decline since August.
Profit-Taking and Waning Expectations
The sudden reversal can be attributed to US investors cashing in on their profits following President-elect Donald Trump’s victory, which initially sparked the rally. Additionally, the feverish speculation that characterized the crypto market has begun to dissipate, as expectations for interest-rate cuts from the Federal Reserve have waned. This shift in sentiment has led to a decrease in appetite for riskier assets.
Exchange-Traded Funds and Institutional Interest
The impact of this trend is evident in the performance of Bitcoin exchange-traded funds (ETFs) in the US. Since December 19, these funds have experienced a net outflow of approximately $1.8 billion. Furthermore, open interest in Bitcoin futures hosted by the CME Group Inc. has fallen nearly 20% from its December peak, indicating a decline in US institutional interest.
A Year of Exceptional Growth
Despite this recent setback, Bitcoin has still managed to rack up an impressive 120% gain in 2024, outperforming both gold and global equities. This remarkable growth can be attributed to the increasing adoption of cryptocurrencies by institutions, including university endowment funds.
Looking Ahead to 2025
As we enter a new year, market analysts predict that institutions will readjust their asset allocations, potentially leading to increased allocations to Bitcoin. This could strengthen Bitcoin’s dominance, stabilize spot movements, and shift volatility dynamics closer to those of equities. As of Wednesday, Bitcoin was trading at $93,518, with smaller coins like Ether and Dogecoin also struggling to gain ground.
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