Bitcoin’s price recently hit an unprecedented high of $108,000, sparking enthusiasm across the cryptocurrency market. However, this bullish momentum was short-lived as Bitcoin’s value has since declined sharply, prompting investors to ponder the underlying causes of this swift market shift. While the initial surge brought optimism, various factors are now influencing the downward trend. If Bitcoin struggles to break past the current resistance level, it may face further declines, potentially reaching $95,000.
Fed’s Interest Rate Decision
One significant factor contributing to Bitcoin’s price drop is the anticipation surrounding the U.S. Federal Reserve’s upcoming interest rate decision. According to reports from Coinpedia, there is a 96% probability that the Fed will decrease rates by 25 basis points. Despite this expectation, there remains uncertainty regarding the Fed’s strategy to manage inflation in the future. With inflation rising to 2.8% in November, Fed Chair Jerome Powell’s comments on the rate outlook for 2025 are being closely observed. Should the Fed opt for lower rate cuts in 2025 than anticipated, it could exert substantial pressure on the market.
Traders Cash In Their Profits
A wave of selling activity by short-term Bitcoin holders is another crucial factor in the recent price decline. Many traders who acquired Bitcoin during the recent rally are now opting to liquidate their holdings and secure profits. Such selling behavior is typical after prices reach new highs. On the other hand, long-term holders, who invested in Bitcoin when it was priced between $90,000 and $100,000, are largely remaining inactive. These investors may be waiting for more stable market conditions before making any significant moves.
History Shows Corrections Are Normal
The historical price cycles of Bitcoin reveal that corrections are a natural aspect of its market behavior. During past all-time highs, Bitcoin has often experienced pullbacks of up to 34%. These short-term declines can erase weeks of gains but are generally considered a normal part of the market’s dynamics. Analysts suggest that this correction could potentially bring Bitcoin below the $100,000 mark temporarily before it stabilizes and resumes its upward trajectory.
Bitcoin’s Potential Drop to $95,000
Currently, Bitcoin is trading around $104,000, reflecting a 2.93% decrease over the past day. For Bitcoin to sustain its upward momentum, it is crucial to convert this recent price peak into a robust support level. If successful, Bitcoin could potentially surpass the much-anticipated $110,000 threshold. However, if Bitcoin fails to breach and maintain its position above this resistance level, the price could face further declines. In such a scenario, Bitcoin might retreat toward its next critical support level at approximately $95,651.
