Wall Street kicked off the week with a price increase during the holiday, pushing the S&P 500 up 0.73%. The Dow Jones Industrial Average modestly rose 0.16% after initial losses, while the Nasdaq Composite surged 0.98%, driven by major companies like Nvidia, Tesla, and Meta Platforms.
However, the crypto market tells a different story. Bitcoin is currently struggling, trading at $96,202 at the time of writing, about $13,000 below its all-time high set on December 17.
BTC 4-hour price chart | Source: Tradingview
MicroStrategy, the ultimate 'hype train' of Bitcoin, has taken a heavy hit. The company's stock plummeted 8.8% on Monday, an unpromising start in the Nasdaq-100 index. With a company heavily reliant on Bitcoin prices, this is not too surprising.
MicroStrategy invested billions of dollars in Bitcoin: A double-edged sword
Despite the drop on Monday, MicroStrategy still marks a prosperous year. The company's stock has risen 426% in 2024, making MicroStrategy one of the most prominent technology companies in the U.S. with a value exceeding $5 billion. All this success comes from the bold gamble called Bitcoin.
The company began accumulating the leading cryptocurrency by market cap in 2020, and its holdings have now increased to nearly $43 billion. Accordingly, MicroStrategy's market value has risen from $1.1 billion to $82 billion.
But the problem here is that that value only exists as long as Bitcoin remains popular. So if Bitcoin's price drops, what will happen? MicroStrategy will suffer even more. The drop on Monday was a clear warning. Bitcoin has fallen below the 50-day moving average, an important level for traders.
What is weighing on Bitcoin? First, the Federal Reserve may slow its interest rate cuts in 2025. This makes investors more cautious about risky investments, and Bitcoin, whether it likes it or not, remains a symbol of speculation. Even with the elected President Donald Trump committing to easing cryptocurrency regulations, the market still does not truly trust and stabilize.
Trump's Bitcoin campaign
Trump's victory has reignited the fire for Bitcoin. The price has surged 40% since Election Day, with traders making big bets on his pro-crypto speech. He has appointed a Chairman of the U.S. Securities and Exchange Commission (SEC), the U.S. Secretary of the Treasury, and the U.S. IRS Commissioner who support cryptocurrency and even established a Crypto Czar's White House Cryptocurrency Council.
Meanwhile, Bitcoin ETFs have also seen a massive inflow of funds since Trump won the election. Over $12 billion has flowed into these funds, but the excitement is beginning to cool down. On December 19, products recorded their largest outflow in a single day in months, indicating that some investors are taking a breather.
But MicroStrategy is not slowing down. The company just announced another Bitcoin purchase worth $561 million, marking its seventh consecutive buying week.
Meanwhile, the broader crypto market is reflecting the ups and downs of Bitcoin. ETH and DOGE have both doubled in value this year, but they still lag behind Bitcoin - up 125% since the beginning of the year.
Thin trading volume may add to the volatility this week. The U.S. market will close early today and will be closed for Christmas on Wednesday, meaning there will be fewer traders to stabilize the situation.
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