Analysis of the Reasons for Bitcoin's Sharp Decline

Recently, the price of Bitcoin has been highly volatile, and the reasons for its sharp decline have attracted considerable attention, mainly for the following two reasons:

Trump-Related Factors

Many believe that Trump has a close relationship with Bitcoin, and his coming to power is good news for Bitcoin, which should have led to a significant price increase. Previously, the price of Bitcoin had surpassed the 100,000 mark, and with Trump set to take office on January 20, the market had anticipated that Bitcoin would reach a historical high, with some even hoping it could reach a peak of 120,000. However, there is a viewpoint suggesting that if Bitcoin rises to a high level, retail investors may get stuck holding it for a long time, with no prospect of breaking free from their positions. Therefore, it is possible that Trump’s side intentionally brought down the price of Bitcoin early, allowing investors to enter at a lower price, and then sell promptly after Trump takes office. This way, even if they do not make a substantial profit, they can avoid the risk of being stuck at high prices.

Expectations of Federal Reserve Monetary Policy

The market expects there is over a 95% probability that the Federal Reserve will not cut interest rates in January, and that in 2025, the Federal Reserve will only cut rates by 37 basis points. This expectation is lower than the two rate cuts predicted in the Fed's dot plot, and some institutions speculate that the Fed may not cut rates at all until July. After the relevant data was released, the market reacted significantly, with the dollar strengthening, while U.S. stocks, bond markets, and the cryptocurrency market all fell, and gold also retraced its earlier gains. Under the influence of this macro monetary policy expectation, investor enthusiasm for risk assets, including Bitcoin, has declined, leading to widespread sell-offs, which in turn caused a sharp decline in Bitcoin prices.

It is worth mentioning that the Musk-themed dog PP, as the strongest concept on the Ethereum chain, has 15,000 holding addresses and is expected to become the next SHIB.