Cryptocurrency prices faced a significant decline on Monday, influenced by weak U.S. macroeconomic data and widespread profit-taking. This downturn impacted major cryptocurrencies and related stocks, signaling a potential shift in market momentum.
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Bitcoin (BTC) experienced a notable drop of 1.8% within 24 hours, reaching $91,800, a level not witnessed since December 5th. This decline represents a significant retreat from its record high of $108,278 on December 17th. Ether (ETH), while exhibiting slightly stronger resilience, fell 0.7% to $3,320. This price point places ETH 17% below its December peak and still below its 2021 all-time high of $4,820. Solana (SOL) demonstrated relative strength compared to Bitcoin, with the SOL/BTC ratio increasing by 0.35% on Monday.
Broad Market Decline and Impact on Related Stocks
The CoinDesk 20, a comprehensive index tracking the top 20 cryptocurrencies by market capitalization (excluding stablecoins, memecoins, and exchange coins), reflected the overall negative trend with a 3.74% decline. Ripple (XRP) and Stellar (XRM) suffered the most substantial losses, dropping 6% and 6.3%, respectively. Litecoin (LTC) proved to be more resilient, experiencing a comparatively smaller decline of 1.9%.
The impact of the market downturn extended beyond cryptocurrencies, affecting related stocks as well. MicroStrategy (MSTR) and Coinbase (COIN) saw their share prices fall by 7% and 5.3%, respectively. Major Bitcoin mining companies, including MARA Holdings (MARA) and Riot Platforms (RIOT), also experienced declines exceeding 7%.
Profit-Taking and Macroeconomic Factors Contributing to Downturn
A significant driver of the selling pressure is attributed to investors capitalizing on Bitcoin’s substantial gains of over 117% this year. Profit-taking, exceeding a seven-day moving average of $1.2 billion, remains elevated compared to historical levels. Notably, long-term Bitcoin holders are responsible for a considerable portion of these profits.
Furthermore, macroeconomic factors played a crucial role in the market’s decline. The U.S. Chicago PMI, a key indicator of manufacturing and non-manufacturing activity in the Chicago area, reached its lowest point since May. This suggests a potential economic slowdown, impacting investor confidence. Uncertainty surrounding the Federal Reserve’s interest-rate policy for 2025, with rate cuts paused until at least March, further contributed to market anxiety. The upcoming inauguration of President-elect Donald Trump in January also added to the prevailing uncertainty, leading to declines in major stock indices like the S&P 500, Nasdaq, and Dow Jones.
Expert Outlook and Future Expectations
Joe Carlasare, a partner at Amundsen Davis, offered insights into the market’s performance and future outlook. “The market surpassed expectations in 2024, but indications of exhaustion pointed toward a necessary period of consolidation,” Carlasare stated. He expressed optimism for 2025 but anticipated a divergence from consensus expectations. Carlasare emphasized Bitcoin’s growing adoption and projected its performance to align with traditional markets. He suggested that if the U.S. can avert a significant economic slowdown, Bitcoin should perform well, albeit with potentially increased volatility compared to 2024. This analysis underscores the interconnectedness of the crypto market with broader economic trends and highlights the importance of macroeconomic factors in shaping its future trajectory. The current downturn serves as a reminder of the inherent volatility within the crypto space and reinforces the need for investors to consider both internal market dynamics and external economic influences when making investment decisions.
