Bitcoin Plummets Below $70,000, Erasing Gains Post-Trump 2024 Victory
Bitcoin has fallen below the critical threshold of $70,000 as of Thursday, marking a significant decline. The cryptocurrency dropped by as much as 3.8%, hitting a low of $69,858, its lowest level since November 2024, shortly after Donald Trump won the presidential election and endorsed cryptocurrency during his campaign.
Current Cryptocurrency Market Trends
This week alone, Bitcoin has experienced nearly an 8% downturn, contributing to a year-to-date loss approaching 20%. Meanwhile, Ethereum, another leading cryptocurrency, decreased by nearly 2%, currently valued at $2,090, reflecting almost a 30% drop for the year.
Key Factors Behind the Decline
- The appointment of Kevin Warsh as the next Federal Reserve Chair has raised investor concerns.
- Expectations suggest Warsh will reduce the Fed’s balance sheet.
- Cryptocurrencies often thrive on an expansive monetary policy, which could change with tighter monetary conditions.
Analyst Manuel Villegas Franceschi from Julius Baer stated, “The market fears a hawk with him. A smaller balance sheet is not going to provide any tailwinds for crypto.”
Market Capitalization Losses
The global cryptocurrency market has seen a staggering decline of nearly $1.9 trillion in value since reaching a peak of $4.379 trillion in early October. In the past month, around $800 billion has been wiped off the market.
Institutional Withdrawals and Investor Sentiment
Months of losses for cryptocurrencies have led to a cooling investor sentiment. Deutsche Bank analysts indicated that substantial withdrawals from institutional ETFs are influencing this decline. In January alone, U.S. spot Bitcoin ETFs saw over $3 billion in outflows, following significant withdrawals of $2 billion and $7 billion in December and November, respectively.
The analysts noted, “This steady selling signals that traditional investors are losing interest, and overall pessimism about crypto is growing.”
Impact of the Tech Sector
Bitcoin’s value has been closely linked to the performance of the technology sector. Recent downturns in global software stocks have exacerbated the decline in Bitcoin, Ethereum, and other digital assets. Concerns about potential forced liquidations among crypto miners if prices continue to drop are emerging.
Jefferies strategist Mohit Kumar emphasized that cryptocurrency should only constitute a small fraction of an investment portfolio. However, with a significant number of retail investors in the market, it poses an increased risk to the broader financial landscape.
