Bitcoin (#BTC ) has hit a speed bump, marking its first seven-day decline in eight weeks. Hawkish signals from the Federal Reserve (Fed) have pushed traders to offload the cryptocurrency, even after an impressive year that saw BTC more than quadruple in value.
Bitcoin's Rollercoaster Ride: From $108,000 to $97,500
The world’s largest cryptocurrency experienced a sharp 5.3% drop to $92,149 last Friday after reaching an all-time high of $108,000 earlier in the week. Despite the setback, Bitcoin has rebounded to $97,500, although it remains 5% lower compared to Sunday.
Other major cryptocurrencies like Ethereum (#ETH ) and Dogecoin (DOGE) haven’t been spared, reflecting a broader market correction despite the strong performance of US equities.
Adding to the downward pressure, US Bitcoin ETFs recorded a staggering $680 million outflow on Thursday, according to Bloomberg. This marked the end of a 15-day streak of inflows, signaling a notable shift in market sentiment.
Election and Fed Signals Add to Market Volatility
The cryptocurrency market has also been influenced by macroeconomic and political factors. For instance, volatility surged following Donald Trump’s November 5 presidential election victory. Analysts at QCP Capital pointed out that overly bullish market positioning left digital assets vulnerable to the Federal Reserve’s tough stance on inflation control.
Federal Reserve Chair Jerome Powell’s recent speech hinted at a potential pause in easing policies, emphasizing the need for traditional financial institutions to embrace cryptocurrencies cautiously.
Is a Bitcoin Rebound Imminent? Historical Patterns Say Yes
According to Hani Abuagla, senior market analyst at XTB, Bitcoin’s price will likely remain sensitive to a mix of monetary policy, institutional adoption, and political events through 2025.
Chris Weston, Head of Research at Pepperstone Group, recommended short-term caution. While he doesn’t foresee a dramatic crash, Weston believes Bitcoin’s recent rally has slowed, indicating a shift in market dynamics.
However, historical data provides hope for investors. Market researcher Lark Davis pointed to December 2020, when Bitcoin dropped 12% following a 77% rally but subsequently soared 136% in just 23 days, climbing from $17,000 to $41,000.
Could history repeat itself? Only time will tell.
The Takeaway
Bitcoin’s recent drop and recovery highlight the unpredictable nature of the cryptocurrency market. While caution is warranted, historical trends and expert opinions suggest that a rebound could be on the horizon. Investors now face a crucial question: Is this the time to buy, HODL, or wait for further clarity?
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