Original | Odaily Planet Daily (@OdailyChina)
Author | Fu He How (@vincent 31515173)
In the past week, the crypto market has continued to fall. Yesterday, after the news that the U.S. Department of Justice was approved to sell the $6.5 billion of seized Bitcoin from the dark web Silk Road was released, Bitcoin fell from $94,000 to below $92,000, exacerbating the panic in the market. Several officials of the Federal Reserve also stated that they would adjust the interest rate policy, suggesting that the pace of interest rate cuts would be slowed down in 2025 and a tightening policy would be implemented. At the same time, under the influence of the Los Angeles wildfire, some analysts pointed out that many wealthy people sold crypto assets to rebuild their lives after the disaster. The various performances of the market have made investors worried about the future of cryptocurrencies.
Today, Russia also began selling 1,032 Bitcoins seized in the Infraud hacker organization case. Under multiple influencing factors, the cryptocurrency market has declined again today.
OKX real-time data shows that as of the time of writing, BTC has dipped below $92,000, currently reported at $93,760, with a 24-hour decline of 0.45%;
Aside from BTC, altcoins led by ETH are also facing significant declines, with ETH dipping below $3,200, currently reported at $3,258, with a 24-hour decline of 1.94%; SOL has dipped below $190, currently reported at $189.57, with a 24-hour decline of 1.4%;
On-chain market data is also suffering from this trend, with the previously popular AI Agent sector experiencing a collective correction. According to GMGN data, AI Agent tokens are experiencing widespread declines, including: ai16z with a 24-hour decline of 23.05%, currently valued at $1.68 billion; FARTCOIN with a 24-hour decline of 31.09%, currently valued at $919 million; ZEREBRO with a 24-hour decline of 41.92%, currently valued at $329 million.
Affected by the overall market upturn, the total market value of cryptocurrencies has also rapidly fallen. Data from CoinGecko shows that the current total market value of cryptocurrencies has dropped to $3.4 trillion, down 3.4% in the last 24 hours. The trading enthusiasm among cryptocurrency users has also decreased, with Alternative's fear and greed index reported at 50 today, changing from greed to neutral.
In terms of derivatives trading, Coinglass data shows that in the last 24 hours, the total liquidation across the network reached $375 million, including $260 million in long liquidations and $115 million in short liquidations. In terms of assets, BTC had liquidations of $99.7435 million and ETH had liquidations of $6.9681 million.
Below, Odaily Planet Daily analyzes the reasons for the recent market decline and future trends.
Multiple factors have led to the decline in the market.
The post-disaster reconstruction caused by the Los Angeles wildfires has made cryptocurrency the fastest way to liquidate assets.
Recently, the devastation caused by wildfires in Los Angeles has not only brought significant property losses to local residents but has also had a significant impact on the cryptocurrency market. According to Coinbase data, after the outbreak of the wildfires, Bitcoin trading volume from Los Angeles and surrounding areas surged, especially large transactions increased significantly, reflecting that some affected families are eager to liquidate cryptocurrency assets to meet the funding needs for post-disaster reconstruction.
According to local real estate market analysts, many wealthy families hold cryptocurrencies like Bitcoin and Ethereum, which they typically view as an important part of their investment portfolios; however, under the devastation of the wildfires, they are forced to quickly liquidate these assets.
The head of a blockchain research institution in Los Angeles also pointed out that the recent price fluctuations in the market may be related to this large-scale asset sell-off. Particularly in the context where tech circle individuals and high-net-worth individuals generally hold a high proportion of cryptocurrency assets, the surge in short-term funding needs after the disaster has intensified market selling pressure. Furthermore, analysts warn that short-term selling behavior may negatively impact the stability of the cryptocurrency market.
The U.S. Department of Justice has been authorized to sell $6.5 billion worth of Bitcoin from the Silk Road dark web.
The U.S. Department of Justice has been authorized to handle 69,370 Bitcoins related to the famous 'Silk Road' case, currently valued at approximately $6.5 billion. This news has triggered market fluctuations, with some investors concerned that the sale of these Bitcoins may conflict with Trump's proposed 'establishing a Bitcoin reserve' plan. However, Trader T stated on the X platform: 'It may take months from 'approved' to 'actual sale,' and the court has established a liquidation plan for 30,000 BTC in 2023.'
Meanwhile, BitMEX co-founder Arthur Hayes stated on the X platform that the 'diamond hands' in the market are ready to buy at this time. CryptoQuant CEO Ki Young Ju also pointed out that about $379 billion entered the market last year, equivalent to about $10 billion per day; therefore, the $6.5 billion worth of Bitcoin sold by the U.S. government could be absorbed by the market in just a week, and investors need not worry excessively. Salvadoran President Nayib Bukele humorously remarked that perhaps we all have a chance to buy Bitcoin at a discount.
Coindesk analyst James Van Straten believes that the market's concerns about the sell-off may be exaggerated. If these 69,370 Bitcoins are indeed sold, they may be sold in an orderly manner to obtain the best possible price. Additionally, the market has already anticipated this situation, so it may have already digested this potential risk.
The Federal Reserve's pace of rate cuts is slowing in 2025.
Recently, the Federal Reserve's monetary policy has changed, mainly reflected in the slowing pace of interest rate cuts. Boston Fed President Collins stated that considering the current strong employment data and ongoing inflationary pressures, she believes that the extent of rate cuts in 2025 will be less than previously expected by the market. Specifically, Collins supports the Federal Reserve cutting rates twice in 2025 instead of the previously expected four times, a change that reflects the Federal Reserve's cautious attitude toward the economic situation.
The Federal Reserve is facing the challenge of strong economic growth and inflation above 2% in the current economic environment. Kansas Fed President Schmid pointed out that the current economic conditions are close to achieving the dual objectives of price stability and full employment, and he believes that policy should remain neutral, with interest rates close to long-term levels. Schmid emphasized that further adjustments to monetary policy will only be made when there are significant changes in the data.
Additionally, Federal Reserve Governor Bowman mentioned in a recent speech that she supports last month's rate cut decision and believes it is the 'last step' in the adjustment of the Federal Reserve's monetary policy. She noted that inflation risks still exist, and therefore future monetary policy decisions will remain cautious.
The challenge facing the Federal Reserve is that, although the current economic performance is strong, stabilizing the inflation rate at the target level of 2% remains difficult. Schmid anticipates that the Federal Reserve may not achieve this goal until 2026.
From the market's expectations, according to CME's 'FedWatch' data, investors generally believe there is a 93.1% probability that the Federal Reserve will maintain the current interest rate in January 2025. In the coming months, although the probability of rate cuts has increased, the market's expectations for the Federal Reserve's policies remain relatively cautious.
Overall, the Federal Reserve's monetary policy has been adjusted, with a slowing pace of rate cuts, reflecting the Federal Reserve's cautious assessment of the current economic situation. Although future rate cuts may continue, the market expects this process to be slower and more cautious.
In 10 days, the trend of the cryptocurrency market may become clearer.
In the next 10 days, the cryptocurrency market may reach a critical turning point. Although market sentiment remains low recently, and investor confidence appears to be slightly weak, multiple signs indicate that the cryptocurrency market may see a warming trend in 2025. According to Reuters, industry insiders revealed that the cryptocurrency industry is actively lobbying the U.S. government to urge the Trump administration to issue an executive order within its first 100 days in office to establish a U.S. Bitcoin reserve. This initiative aims to ensure that the cryptocurrency industry can access banking services and plans to set up a dedicated cryptocurrency advisory committee. Insiders expect this order to be issued as early as January 20, 2025. This action may provide new policy support for the cryptocurrency industry and serve as a catalyst for market recovery.
On the other hand, the fundamentals of the cryptocurrency market remain strong. Data from IntoTheBlock shows that despite the overall market downturn, the net outflow trend from centralized exchanges (CEX) continues. The data indicates that an increasing number of investors are choosing to hold assets long-term rather than panic sell due to short-term price fluctuations. This phenomenon suggests that there is still strong confidence in the market, and investors remain optimistic about the future growth potential of cryptocurrency assets. These behaviors reflect a positive attitude towards the long-term development of cryptocurrencies, with hopes for the market to recover after short-term adjustments.
Additionally, the regulatory environment for altcoins is expected to improve in 2025. Andrew Baehr, managing director of CoinDesk, pointed out that altcoins will benefit from changes in the cryptocurrency regulatory environment in 2025, particularly as the SEC may ease its regulatory pressure on altcoins, providing a more lenient policy environment for more cryptocurrency projects to launch. The improvement in regulation will help attract more projects into the market and may further promote the healthy development of the market.
Finally, the trend of integration between AI and cryptocurrency will become increasingly apparent. With the participation of Web2 giants, the underlying technology of AI in the cryptocurrency field will be further strengthened. Members of leading industry companies such as Coinbase, Google, and a16z have joined together to launch the 'Aiccelerate' project, a decentralized autonomous organization (DAO) aimed at accelerating the deep integration of cryptocurrency and artificial intelligence technologies. AI technology is expected to play an increasingly important role in the development of blockchain projects, transaction execution, risk management, and other areas, bringing more innovation and transformation to the cryptocurrency industry.
In summary, despite the current challenging market environment, with the gradual implementation of policy support, the recovery of investor confidence, and the promotion of AI technology, the cryptocurrency market in 2025 is expected to gradually recover and may welcome a new peak of development.
