Cryptocurrencies start the week with marked declines. Bitcoin (BTC) yields up to US$90,597.33. In the last seven days, the leading cryptocurrency loses more than 6%, after reaching a yearly high of $102,300 on January 7.
Altcoins also record falls. Ethereum (ETH) It loses more than 2% and falls below US$3,200. Like BTC, the second largest cryptocurrency has not had its best week, with a devaluation of more than 10% in the last seven days.
Other tokens also suffer larger losses: Cardano (ADA) loses up to 8% in the last 24 hours, while sui (SUI) and avalanche (AVAX) fall 7% and 6%, respectively. Cryptocurrencies such as XRP, Binance coin (BNB), Solana (SOL) and Dogecoin (DOGE) experience drops of between 3% and 5%.
What’s behind the bleeding?
The weakness of the cryptocurrency market coincides with the publication of several macroeconomic indicators in the United States that were better than expected. The most recent data is the December employment report, which revealed the creation of 256,000 new non-farm jobs, far exceeding expectations, which anticipated 160,000 new jobs.
In addition, the unemployment rate decreased by one tenth of a percentage, standing at 4.1%. This data has completely dispelled expectations of an interest rate cut by the Federal Reserve (Fed) in January and almost also in March and May. It is worth remembering that the US central bank reduced its forecast for cuts in 2025, lowering it to 50 basis points (bp), which is equivalent to two reductions of 25 bp or one large cut of 50 bp.
Michael Brown, senior research strategist at Pepperstone, assesses that “the FOMC remains on track to ‘skip’ the January meeting, leaving the federal funds rate unchanged, which will allow time to assess the effects of the 100-point normalization.” basics implemented last year, at the same time that it will allow us to review the inflationary risks and the impacts of the first policies of the incoming Trump administration.
On the other hand, 10x Research experts point out that, although narratives focused on Trump’s policies remain the main topic of discussion, “financial markets tell a different story.” They highlight that US stocks have erased all gains made since Trump’s election in November, when higher growth and tax cuts were initially expected. Furthermore, the expected rally in altcoins following the elections quickly faded on December 6. This date is not a mere coincidence, as it marks a key moment with significant implications.
These analysts also note that cryptocurrency trading volumes have fallen “substantially” from early November highs, and funding rates “peaked” on December 6. This suggests deep significance for that date, which coincides with the Fed’s revised outlook and the release of less favorable macroeconomic data.
However, other analysts have a less pessimistic view of the future of cryptocurrencies, especially bitcoin. According to experts such as Axel Bitblaze, bitcoin usually experiences falls similar to those of the first months after a ‘halving’ (reduction in rewards for mining blocks), such as the one expected for April 2024. “We all know what happened next of the falls of 2017 and 2021,” he recalls.
“Bitcoin is at a crossroads, with a market reflecting both ambition and caution. The breakdown of this consolidation will mark the next chapter in the history of the digital asset, determining whether it will continue its path to new records or if it will retreat to seek a new equilibrium. In any case, interest in bitcoin continues to be a thermometer of risk appetite in global markets, and its evolution will be key to understanding where the cryptocurrency ecosystem is headed,” conclude the Barclays analysts.
Source: Ambito
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