Article reproduced from: Odaily Planet Daily
Original | Odaily Planet Daily
Author | How to be a husband
In the past week, the cryptocurrency market has continued to decline. Yesterday, after the news that the U.S. Department of Justice was authorized to sell $6.5 billion of seized Silk Road Bitcoin was released, Bitcoin dropped from $94,000 to below $92,000, intensifying market panic. Several Federal Reserve officials also indicated that they would adjust interest rate policies, implying a slowdown in rate cuts and the implementation of tightening policies in 2025. Meanwhile, under the influence of wildfires in Los Angeles, some analysts pointed out that many wealthy individuals are selling cryptocurrency assets to rebuild their post-disaster lives. The various market performances have led investors to worry about the future of cryptocurrency.
Today, Russia has also begun selling 1,032 Bitcoins seized in the Infraud hacker organization case. Under multiple influencing factors, the cryptocurrency market has once again declined today.
OKX real-time market data shows that as of the publication of this article, BTC has fallen below $92,000, currently at $93,760, with a 24-hour decline of 0.45%;
In addition to BTC, altcoins led by ETH are also facing significant declines, with ETH dropping below $3,200, currently at $3,258, with a 24-hour decline of 1.94%; SOL has fallen below $190, currently at $189.57, with a 24-hour decline of 1.4%;
On-chain market data also cannot escape this difficulty, with the previously booming AI Agent sector experiencing a collective major pullback. According to GMGN market data, AI Agent tokens have continued to decline, with ai16z experiencing a 24-hour decline of 23.05%, currently valued at $1.68 billion; FARTCOIN experiencing a 24-hour decline of 31.09%, currently valued at $919 million; ZEREBRO experiencing a 24-hour decline of 41.92%, currently valued at $329 million.
Due to the overall upward trend in the market, the total market capitalization of cryptocurrencies has also rapidly declined. CoinGecko data shows that the current total market capitalization of cryptocurrencies has dropped to $3.4 trillion, down 3.4% in 24 hours. The trading enthusiasm among crypto users has also decreased, with Alternative's fear and greed index reporting 50 today, shifting from greed to neutral.
In terms of derivatives trading, Coinglass data shows that in the past 24 hours, $375 million has been liquidated across the network, including $260 million in long positions and $115 million in short positions. In terms of cryptocurrencies, BTC saw liquidation of $99.7435 million, while ETH saw liquidation of $69.6681 million.
Below, Odaily Planet Daily analyzes the reasons for the recent market decline and future trends.
Multiple factors have led to the market decline.
The post-disaster reconstruction caused by the wildfires in Los Angeles has made cryptocurrency the fastest way to liquidate assets.
Recently, the rampant wildfires in Los Angeles have not only caused significant property losses to local residents but have also had a significant impact on the cryptocurrency market. According to Coinbase data, after the outbreak of the wildfire, the trading volume of Bitcoin from Los Angeles and surrounding areas surged, especially with large transactions significantly increasing, reflecting that some affected families are eager to liquidate their crypto assets to meet the funding needs for post-disaster reconstruction.
According to local real estate market analysts, many wealthy families hold cryptocurrencies such as Bitcoin and Ethereum, often viewing them as an important part of their investment portfolio. However, under the devastation of wildfires, they have to quickly liquidate these assets.
The head of a blockchain research institution in Los Angeles also pointed out that the recent price fluctuations in the market may be related to this large-scale asset sell-off. Especially against the backdrop of tech industry individuals and high-net-worth individuals holding a high proportion of crypto assets, the surge in short-term funding needs after the disaster has exacerbated the selling pressure in the market. Additionally, analysts warn that short-term selling behaviors may negatively impact the stability of the cryptocurrency market.
The U.S. Department of Justice has been authorized to sell $6.5 billion of seized Silk Road Bitcoin.
The U.S. Department of Justice has been authorized to manage 69,370 Bitcoins related to the infamous 'Silk Road' case, currently valued at approximately $6.5 billion. This news has triggered market fluctuations, with some investors concerned that the sale of this Bitcoin may conflict with Trump's proposed 'establishing a Bitcoin reserve' plan. However, Trader T stated on the X platform: 'From 'approved' to 'actual sale' may take months, and the court has established a liquidation plan for 30,000 BTC in 2023.'
Meanwhile, BitMEX co-founder Arthur Hayes stated on the X platform that the market's 'diamond hands' are ready to buy at this time. CryptoQuant CEO Ki Young Ju also noted that approximately $379 billion entered the market last year, equivalent to about $1 billion per day. Therefore, the $6.5 billion in Bitcoin sold by the U.S. government could be absorbed by the market in just a week, so investors need not worry excessively. El Salvador President Nayib Bukele humorously stated that perhaps we all have the chance to buy Bitcoin at a discount.
Coindesk analyst James Van Straten believes that the market's fears about the sell-off may be exaggerated. If these 69,370 Bitcoins are indeed sold, they may be sold in an orderly manner to obtain the best price possible. Furthermore, the market has long anticipated this situation, so it may have already digested this potential risk.
The pace of interest rate cuts by the Federal Reserve will slow down in 2025.
Recently, the Federal Reserve's monetary policy has changed, primarily reflected in the slowdown of interest rate cuts. Boston Fed President Collins stated that considering the current strong employment data and persistent inflationary pressures, she believes that the magnitude of rate cuts in 2025 will be less than previously expected by the market. Specifically, Collins supports the Federal Reserve cutting rates twice in 2025, rather than the previously expected four times, reflecting the Federal Reserve's cautious attitude towards the economic situation.
The Federal Reserve faces the challenge of strong economic growth and inflation above 2% in the current economic environment. Kansas Fed President Schmidt pointed out that the current economic conditions are close to achieving the dual goals of price stability and full employment, and he believes that policy should remain neutral, with interest rates close to long-term levels. Schmidt emphasized that further adjustments to monetary policy will only be made when data changes significantly.
In addition, Federal Reserve Governor Bowman mentioned in a recent speech that she supports last month's interest rate cut decision and believes this is the 'final step' in the adjustment of the Federal Reserve's monetary policy. She pointed out that inflation risks still exist, so future monetary policy decisions will remain cautious.
The challenge facing the Federal Reserve is that although the current economy is performing strongly, stabilizing the inflation rate at the target level of 2% remains difficult. Schmidt expects that the Federal Reserve may not achieve this goal until 2026.
From the market's expectations, according to CME's 'FedWatch' data, investors generally believe that there is a 93.1% probability that the Federal Reserve will maintain the current interest rates unchanged in January 2025. In the coming months, although the probability of interest rate cuts has increased, the market's expectations for Federal Reserve policies remain relatively cautious.
Overall, the Federal Reserve's monetary policy has been adjusted, with a slowdown in the pace of interest rate cuts, reflecting the Federal Reserve's cautious assessment of the current economic situation. While further rate cuts may still continue in the future, the market expects this process to be slower and more cautious.
In 10 days, the trend of cryptocurrency may become clearer.
In the next 10 days, the cryptocurrency market may face a critical turning point. Although recent market sentiment remains low and investor confidence appears somewhat fatigued, multiple signs indicate that the cryptocurrency market in 2025 is likely to welcome a round of recovery. According to Reuters, industry insiders have revealed that the cryptocurrency industry is actively lobbying the U.S. government, asking the Trump administration to issue an executive order within the first 100 days of taking office to establish a U.S. Bitcoin reserve. This initiative aims to ensure that the crypto industry can access banking services and plans to set up a dedicated cryptocurrency advisory committee. Sources expect this order may be issued as early as January 20, 2025. This action could provide new policy support for the crypto industry and become a catalyst for market recovery.
On the other hand, the fundamentals of the cryptocurrency market remain strong. Data from IntoTheBlock shows that despite the overall decline in the market, the net outflow trend from centralized exchanges (CEX) continues. The data indicates that more and more investors are choosing to hold their assets for the long term rather than panic sell due to short-term price fluctuations. This phenomenon demonstrates that there is still strong confidence in the market, and investors remain optimistic about the future growth potential of crypto assets. These behaviors reflect investors' positive attitudes towards the long-term development of cryptocurrencies, hoping the market can recover after a short-term adjustment.
Additionally, the regulatory environment for altcoins is expected to improve in 2025. Andrew Baehr, Managing Director at CoinDesk, pointed out that altcoins will benefit from changes in the cryptocurrency regulatory environment in 2025, especially as the SEC may ease its regulatory pressure on altcoins, which will provide a more favorable policy environment for the launch of more crypto projects. The improvement in regulation will help attract more projects to enter the market and may further promote the healthy development of the market.
Finally, the trend of integration between AI and cryptocurrencies will become increasingly apparent. With the participation of Web2 tech giants, the underlying technology of AI in the crypto space will be further strengthened. Industry leaders such as Coinbase, Google, and a16z have jointly launched the 'Aiccelerate' project, a decentralized autonomous organization (DAO) aimed at accelerating the deep integration of cryptocurrencies and AI technology. AI technology is expected to play an increasingly important role in areas such as blockchain project development, transaction execution, and risk management, bringing more innovation and transformation to the crypto industry.
In summary, although the current market environment is relatively tough, with the gradual implementation of policy support, the recovery of investor confidence, and the push of AI technology, the cryptocurrency market in 2025 is expected to gradually recover and may usher in a new peak of development.
