Bitcoin’s Trump-era hype is facing a reality check.
The top cryptoasset’s latest rally came to a screeching halt and tumbled to $95,000 on Wednesday, a 7% slump this week. The broader crypto market also shed 7% of its value to $3.48 trillion in the last 24 hours.
The plunge coincided with strong economic data from the US on Tuesday including a surge in job openings and manufacturing.
These positive economic numbers reinforce Federal Reserve Chair Jerome Powell’s position that reducing the pace of interest rate cuts this year might be enough to manage inflation.
Macro-driven
That’s unsettling news for Bitcoin investors.
Their previous bullish optimism was built on the combination of the central bank aggressively cutting interest rates and Donald Trump’s second presidency ushering in regulatory clarity for crypto.
“In the absence of a fresh narrative for crypto to latch onto, the market is currently tracking traditional finance habits,” Philipp Pieper, co-founder of Swarm Markets, a DeFi platform for trading tokenised stocks, told DL News.
Investors’ appetite for riskier assets like cryptocurrencies and tech stocks tends to increase when interest rates are low, which motivates traders to chase higher returns.
Pieper said the current febrile market conditions will persist until investors have greater clarity on what the Trump administration’s crypto policies are.
Macroeconomic data will remain crucial for forecasting Bitcoin’s price, analysts at crypto research outfit 10x Research said in a Wednesday report.
They cited the Fed’s response to strong economic data in the US and global liquidity as two major macro drivers of Bitcoin’s price.
Bitcoin in the short term could slip into the banana zone created by both macro factors. The banana zone describes a range of volatile price movements by an asset. It derives its name from its shape and because things tend to go a bit bananas in it.
BitMEX founder Arthur Hayes also referenced dollar liquidity and its impact on Bitcoin’s price in his latest blog post.
Hayes said Bitcoin and crypto prices rally when dollar liquidity increases.
Still in demand
Despite the current market turmoil, analysts say the overall sentiment for Bitcoin is still bullish.
On-chain data from crypto analytics provider CryptoQuant shows that apparent demand for Bitcoin “remains very high.”
The metric compares the volume of idle Bitcoin against the issuance of new Bitcoin from miners. It’s considered to be high if the decrease in idle Bitcoin still far exceeds the new supply of Bitcoin from miners.
Analysts also referenced Bitcoin’s historical price performance to dismiss fears of a collapse.
Bitcoin has slumped in January after the last two US presidential elections. In both January 2017 and January 2021, Bitcoin declined 36%.
Crypto market movers
Bitcoin has fallen 4% over the past 24 hours to trade at $95,380.
Ethereum is down 5.5% to trade at $3,373.
What we’re reading
This is when Arthur Hayes says Bitcoin’s price will peak ― DL News
The Chopping Block: Scarcity vs. Abundance, AI’s Crypto Role, and Virtuals ― Unchained
4 Crazy Onchain Wins (And Losses) ― Milk Road
2025 Will Be a Year of Crypto Competition. Can Ethereum Make a Comeback? ― Unchained
How Trump’s trade war with China will supercharge Bitcoin ― DL News
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
