Bitcoin Struggles Under Pressure: Drops Below $98,000 As Treasury Yields Climb

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On Tuesday, there was a considerable fluctuation in Bitcoin‘s price, dipping by approximately 4.8% to reach around $97,000. This followed a temporary spike that pushed its value beyond $100,000 at the start of the week.

Notably, significant drops were observed in prominent cryptocurrency stocks like Coinbase and MicroStrategy, amounting to over 7% and 9% decrease respectively. Similarly, Bitcoin mining firms such as Mara Holdings and Core Scientific experienced a comparable decline, with approximately 5% drop each.

Bitcoin Prices Drop Amid Rising Treasury Yields And Economic Concerns

Based on current news, it appears that Bitcoin’s price drop occurred around the same time as a sharp rise in the 10-year U.S. Treasury yield. This increase was prompted by data from the Institute for Supply Management (ISM), suggesting a quicker-than-anticipated expansion in the U.S. services sector for December.

As a researcher, I’ve been closely observing the recent news that’s sparked worries about sustained inflation. This phenomenon often exerts pressure on growth-focused investments like cryptocurrencies. Over the years, it has been noticeable that an increase in Treasury yields tends to correlate inversely with risk assets such as Bitcoin. In simpler terms, when Treasury yields rise, it usually means a decline in the value of riskier assets like Bitcoin.

On Monday, Bitcoin’s value surpassed $102,000 and many experts predict it will double in value this year, assuming clearer regulations boost digital asset prices. Yet, the Fed’s possible future interest rate reductions could create difficulties for Bitcoin’s price trend.

In December, the Federal Reserve hinted that although it reduced interest rates for the third time, the speed of further reductions could be less than what investors anticipated. Generally, a decrease in interest rates boosts Bitcoin’s price, while an increase puts pressure on it to decline.

Experts link the recent drop in Bitcoin’s value not just to increased yields but also to a growing relationship between Bitcoin and conventional stocks, notably those listed on the Nasdaq, which appears to be a significant factor.

In simpler terms, Bob Wallden, who leads trading at the digital asset company Abra, pointed out that the release of ISM data caused a drop in stock prices, which also affected the cryptocurrency market.

Wallden proposes that the drop was further intensified by traders selling off (profit-taking) and setting stop-loss orders when their Bitcoin investments exceeded $100,000. In simpler terms, he suggests that the fall was worsened due to some traders cashing out their profits and others automatically selling due to a predetermined price threshold.

In simple terms, uncertainty caused by changing statements from the newly elected president about trade talks has added to the market’s instability, and this unpredictability has also contributed to a sense of caution among Bitcoin investors.

Investors Cash In As 2024 Highs Fade

2024 saw Bitcoin reach unprecedented heights, but its impressive surge started to slow down towards the end of December as investors decided to cash in their earnings. The enthusiasm about a crypto-friendly administration under Trump had earlier propelled Bitcoin to a record peak of $108,000 in December.

Nonetheless, according to Bloomberg, the future of cryptocurrency in 2025 could hinge significantly on whether President Trump fulfills his promises concerning cryptocurrencies, particularly the creation of a national reserve of Bitcoins.

Although there’s a sense of hopefulness, there’s still a fair amount of doubt lingering around. A recent MLIV Pulse poll unveiled that approximately 39% of participants anticipate Bitcoin, which was once predicted to be a successful investment in 2024, may instead turn into an unprofitable investment in 2025. This percentage is the highest among the various assets assessed in the survey.

In light of recent trends, analyst Ali Martinez suggests that Bitcoin could find some backing around $97,000. Moreover, the TD Sequential indicator points to a favorable buying moment on the hourly chart.

Should the current resistance level persist, it might lead to an upward correction. Nevertheless, according to Martinez, a drop below the $97,000 mark might indicate a possible descent that could extend as far as the $92,000 support level.

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2025-01-15 17:47