At the beginning of the week, the cryptocurrency market experienced a wave of sell-offs as the optimism triggered by Trump's victory began to fade, writes Bloomberg.
On Monday, Bitcoin briefly fell to $94,255, while the index of smaller digital assets dropped by 15%, marking one of the largest intraday declines this year.
Speculators rushed into the cryptocurrency market after the U.S. elections on November 5, inspired by Trump's promise to create a favorable regulatory environment and his controversial support for a national Bitcoin reserve fund. However, the volatility of digital assets causes investors to quickly exit their positions.
On December 5, Bitcoin reached a record high of $103,990 but subsequently faced difficulties holding above the six-figure mark. The total cryptocurrency market shrank by about $200 billion over the past 24 hours, according to CoinGecko tracker.
Recent trading indicates 'deleveraging in the crypto ecosystem,' said Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors LLC. One possible trigger may be caution ahead of U.S. inflation data on Wednesday, which could impact expectations for Fed rate cuts, according to Farrell.
According to Coinglass, about $1.6 billion in bullish positions in cryptocurrencies was liquidated in the last 24 hours through derivatives.
Trump appointed a digital asset supporter as the next head of the U.S. Securities regulator and named the first-ever White House advisor on AI and cryptocurrencies. The Republican was previously skeptical about cryptocurrencies but changed his position when the industry invested significant funds to promote its interests during the election campaign.
Fans of digital assets are awaiting a major boom, hoping that the new president will lift the restrictions imposed by the Biden administration. Critics argue that widespread recognition of cryptocurrencies carries numerous risks.
Since Trump's election, around $10 billion has flowed into spot Bitcoin ETFs. Meanwhile, MicroStrategy reported on Monday that it purchased an additional $2.1 billion in BTC.
Traders may view MicroStrategy's announcements of past purchases as 'an implicit withdrawal of significant spot demand from the market,' noted Farrell.
As of 09:42 Moscow time on Tuesday, Bitcoin was trading at $97,267. Smaller tokens like Ether and the meme-favorite Dogecoin struggled to attract demand.
Technical analyst Katie Stockton from Fairlead Strategies LLC recommended a 'neutral short-term approach' after Bitcoin failed to hold above the $100,000 mark.