Bitcoin (BTC-USD) experienced its first price drop in three days, declining as much as 3.4% to $95,110 in New York on Thursday. This retreat follows a record-breaking rally that propelled the cryptocurrency to over $108,000 on December 17th. The broader cryptocurrency market, including Ether, Solana, and Dogecoin, also saw a decline of around 3.5%. This pullback signals a potential shift in market sentiment as traders prepare for the year’s end.
Experts attribute the recent dip to a combination of factors, primarily year-end and holiday risk reduction. Zaheer Ebtikar, founder of crypto fund Split Capital, suggests that large investors are content to close out the year with Bitcoin around the $100,000 mark. This sentiment reflects a strategic move to secure profits after a period of substantial gains.
Interestingly, the price decline occurred despite MicroStrategy Inc. (MSTR) announcing plans to further expand its Bitcoin holdings. The company, already the largest publicly traded corporate holder of Bitcoin with over $40 billion invested, filed with the U.S. Securities and Exchange Commission on December 23rd to increase its authorized shares of Class A common stock and preferred stock. This move suggests MicroStrategy intends to bolster its Bitcoin acquisition strategy even further.
Market observers like Sean McNulty, director of trading at liquidity provider Arbelos Markets, highlight the significant impact of MicroStrategy’s actions on Bitcoin’s price. He notes that the market anticipates MicroStrategy’s buying activity, which has become a key driver of recent price increases. MicroStrategy’s consistent purchasing activity, including a recent acquisition of $561 million worth of Bitcoin at near record-high prices, underscores its commitment to the cryptocurrency. This marks the seventh consecutive week of Bitcoin purchases by the company.
Bitcoin’s impressive 130% surge in 2024, outperforming traditional assets like global stocks and gold, demonstrates its growing prominence in the investment landscape. However, some traders warn of potential volatility in the coming days due to massive expiries of open interest in Bitcoin and Ether derivatives. A record $43 billion of open interest, including significant amounts in Bitcoin and Ether options, is set to expire on derivatives exchange Deribit on Friday. This event could trigger market fluctuations as market makers adjust their positions. McNulty suggests that the unwinding of hedges and shorting of Bitcoin strikes could lead to a choppy market on Friday. This potential volatility underscores the dynamic and often unpredictable nature of the cryptocurrency market. While Bitcoin has enjoyed a remarkable rally in 2024, the recent dip and upcoming derivatives expiries serve as reminders of the inherent risks associated with this emerging asset class.
