Bitcoin $BTC experienced its first weekly decline since the November elections, dropping 12% over the past seven days. As of Monday, December 23rd, the leading cryptocurrency is trading at $93,375, significantly down from its all-time high of $108,353 reached on December 17th.
This downturn began on Wednesday, December 18th, following the Federal Reserve's signal that it plans to slow the pace of interest rate cuts in the coming year. This decision is based on a relatively stable unemployment rate and minimal recent improvement in inflation.
Like other risk assets, cryptocurrencies are sensitive to changes in US interest rates. Generally, they tend to rise when rates fall, as risk appetite increases. Conversely, they tend to decline with rising rates, as US Treasury bonds become a more attractive investment for investors seeking safer havens.
Will the decline continue?
Ana de Mattos, a technical analyst and trader partnered with Ripio, suggests that the short-term price direction will depend on trading activity. She identifies key support levels at $90,230 and $87,500.
"Observing the volume injected into the market, we can note a high inflow, suggesting absorption by buyers. However, for the asset's price to resume its upward trend, it needs to overcome the short-term resistance at $99,600," she said.
Sean McNulty, director of trading at liquidity provider Arbelos Markets, anticipates that the $90,000 level will hold until the end of the year. However, he cautions that "if we break below that, we could trigger more sell-offs."
David Lawant, head of research at cryptocurrency broker FalconX, predicts short-term instability before a "bullish trajectory" in the first quarter of 2025. This is primarily due to a major options contract expiration event in the crypto market on December 27th.
Is it a good time to buy the dip?
Tasso Lago, a cryptocurrency specialist and founder of Financial Move, believes that the fundamentals of the digital currency market remain strong. "It's just short-term noise due to the Fed's announcement (last week), so I see this drop as an opportunity," he said.
Despite the recent decline, the outlook for Bitcoin in 2025 remains optimistic. VanEck, an investment management firm, expects Bitcoin to reach $180,000 in the first half of next year. British bank Standard Chartered predicts $BTC could hit $200,000 by the end of 2025. These institutions cite institutional capital entering the crypto industry and supportive policies as key drivers for the digital asset.
Risks
It is crucial to remember that cryptocurrencies are considered high-risk assets, primarily due to their high volatility. Experts recommend that investors carefully evaluate the crypto industry and only allocate funds they can afford to lose.
