As soon as 2025 begins, Bitcoin appears ready to bounce back after the downturn at the end of the year - and not long after, the price of this cryptocurrency rose back above $100,000.
But the long-awaited return to six figures, a key psychological threshold to confirm that the rally has returned, has proven to be short-lived.
BTC fell 6% in 24 hours from Tuesday to Wednesday, leaving many traders scratching their heads trying to figure out what factors could explain this decline.
It is always difficult to pinpoint a specific reason for such a correction. There tends to be many issues at play, with sell-offs often triggering additional selling.
So then: let's take a look at the reasons why Bitcoin is down today… and how long this decline might last.
Economic concerns in the United States
Although Bitcoin and Wall Street do not always move in sync, it is clear that major stock indices also ended Tuesday's trading session in the red.
The S&P 500 index closed down 1.1% and even the Nasdaq 100 technology index dropped 1.9% in value.
Why the pessimism? Because the U.S. economy is proving to be more resilient than initially thought, and that is jeopardizing the outlook for the next rate cut.
In addition to the surprising increase in the number of jobs needed for U.S. labor, there are increasing signs reinforcing the view that inflation will remain high for a longer period.
Even before the latest data, officials at the Federal Reserve had warned that they expect to reduce borrowing costs twice in 2025. Earlier estimates predicted there would be four cuts.
Market watchers are even more pessimistic - believing there is only a 60% chance that the U.S. central bank will cut interest rates for the second time in the next 12 months.
Rising interest rates are good news for savers but bad news for riskier assets like Bitcoin, which become less attractive in comparison.
Concerns are growing about inflation, which will not be alleviated by the real worries about the potential impact of Donald Trump's tariffs - with new reports on how he intends to push them.
CNN reports that the new president may declare a national emergency to have enough legal basis to impose additional tariffs on imports into the U.S. from around the world.
Previously, Trump had announced a 10% tariff on international goods - increasing to 25% on products from Canada and Mexico, and up to 60% if they come from China.
Specific factors of Bitcoin
When BTC initially surged to $100,000, there was no shortage of predictions that this rally could continue all the way to 2025 and beyond - with a price target of $180,000 or more.
But we are starting to see some experts backtrack, with some hinting that a bear market could occur much sooner than initially thought.
BitMEX co-founder Arthur Hayes recently warned that the cryptocurrency market could peak by the end of March and suggested that Trump would not be able to deploy a strategic Bitcoin reserve in the U.S.
But he still believes that BTC has the potential to accelerate to $1 million in the "next three to five years" as consumers become increasingly focused on saving for retirement.
The significant reversal in Bitcoin's fortunes, which began on Tuesday, has yet to fully reflect the data tracking inflows and outflows from exchange-traded funds.
News from SoSoValue.com reports that the total daily net inflows into ETFs tracking the spot price of BTC reached $908.1 million last Friday and $987 million on Monday.
But by Tuesday, when the $100,000 threshold was lost, net inflows had dropped to just $52 million - and it seems that the outflows will be confirmed when Wednesday's figures are calculated.
BTC is currently up 12% from its all-time high of $108,268.45 set on December 17, 2024, making this level a crucial threshold that the bulls need to reach to maintain control.
And Donald Trump's inauguration - taking place just 12 days from now - will be an important test, as the market looks for signs that the president will quickly enact Bitcoin-friendly policies as soon as he steps into the Oval Office.
With SEC Chairman Gary Gensler and CFTC Chairman Rostin Behnam also set to resign on January 20, and confirmation hearings for their replacements taking place, the situation will be even more unstable before a clear path for the U.S. cryptocurrency industry can be seen.
Even MicroStrategy's aggressive purchases are no longer enough to provide significant momentum for BTC.
But there is a small consolation for Bitcoin players: while the past 24 hours may have been painful, altcoins have fared much worse with many coins suffering double-digit losses.
