In a significant shift in market momentum, Bitcoin experienced its first weekly decline since Donald Trump’s unexpected election victory, as the Federal Reserve’s cautious monetary policy outlook tempered the cryptocurrency market’s recent euphoria. The largest digital asset dropped 9.5% over the past week, settling around $96,000 as of Monday morning in London, marking a notable retreat from its recent all-time high of approximately $108,000.
The downturn comes at a crucial juncture for the cryptocurrency market, which had been riding high on a wave of optimism following Trump’s election victory and his subsequent promises of crypto-friendly regulations. The president-elect’s unprecedented proposal for a national Bitcoin stockpile had initially catalyzed a dramatic surge in cryptocurrency valuations, but the Federal Reserve’s recent policy decisions have introduced a new element of uncertainty into the market.
Federal Reserve’s Impact
The Federal Reserve’s announcement of a third consecutive interest rate cut, coupled with signals of a more measured approach to monetary easing in 2025, has significantly influenced market sentiment. The central bank’s commitment to maintaining inflation control through a more conservative easing schedule has prompted a broader reassessment of risk assets, affecting both traditional financial markets and the cryptocurrency sector.
Sean McNulty, director of trading at liquidity provider Arbelos Markets, highlighted the technical significance of current price levels, noting, “The $90,000 support level for Bitcoin remains crucial as we approach year-end. A breach below this threshold could trigger cascading liquidations.” McNulty’s analysis gains additional weight in light of recent developments in the options market, where substantial purchases of put options with strike prices between $75,000 and $80,000 for the first quarter of 2025 suggest growing hedging activity among institutional investors.
Market Dynamics and Institutional Activity
The cryptocurrency market’s broader decline has been even more pronounced than Bitcoin’s individual performance, with a comprehensive crypto market index, which includes major altcoins like Ether and Dogecoin, registering a steeper 12% decline. This wider market reaction underscores the interconnected nature of cryptocurrency valuations and their sensitivity to macroeconomic policy shifts.
Adding to the market pressure, U.S. exchange-traded funds focused on direct Bitcoin investments reported record outflows last week. This institutional selling pressure comes at a particularly sensitive time, as the market approaches what David Lawant, head of research at crypto prime broker FalconX, describes as “the biggest options expiry event in crypto history” scheduled for December 27.
MicroStrategy’s Continued Influence
Market attention remains fixed on MicroStrategy Inc., the software company turned Bitcoin proxy, whose aggressive acquisition strategy has made it a bellwether for institutional cryptocurrency investment. The company’s weekly Bitcoin purchasing program has become a crucial market indicator, with traders closely monitoring whether these systematic purchases will continue in the face of recent price volatility.
Looking Ahead: Market Prospects for 2025
Despite the current market turbulence, industry analysts maintain a cautiously optimistic outlook for early 2025. David Lawant suggests that while near-term price action may remain choppy, the fundamental trajectory appears bullish for the first quarter of the new year. This perspective is supported by several factors, including:
- The anticipated impact of Trump’s proposed crypto-friendly regulatory framework
- Continuing institutional adoption of cryptocurrencies
- The broader market’s adaptation to the Federal Reserve’s monetary policy stance
However, the immediate future presents several challenges. The upcoming holiday period’s traditionally low liquidity conditions, combined with the looming large-scale options expiry, could introduce additional price volatility. Market participants are particularly focused on the critical $90,000 support level, which could prove decisive in determining Bitcoin’s short-term price direction.
Current Market Context
Bitcoin’s present valuation of approximately $96,000 represents a significant premium over its pre-election levels, maintaining an impressive 40% gain since the November 5 presidential election. However, the recent pullback from the December 17 all-time high highlights the market’s ongoing struggle to balance optimistic regulatory prospects against tightening monetary conditions.
The cryptocurrency market’s reaction to these competing influences will likely define trading patterns through the remainder of the year, with particular attention paid to institutional positioning ahead of the holiday period and the crucial December 27 options expiry event. As the market navigates these challenges, the interplay between political promises of crypto-friendly policies and economic realities of monetary tightening continues to shape the digital asset landscape.
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