Bitcoin has recorded a major decline this week, dropping sharply from over $100,000 to
around $91,200. This development marks its lowest price since November 2024. This
steep fall has caused ripples across the entire cryptocurrency market, leading to
substantial liquidations and heightening trader panic amid market uncertainty. Just like
Bitcoin, other cryptocurrencies such as XRP, and Ethereum are down with Ether falling
by over 6%.
Reports suggested that one of the key reasons behind this sudden downturn is the
rumour surrounding the U.S. Department of Justice’s (DoJ) sale of Silk Road Bitcoin
holdings. The reports claimed that the sale by the DoJ triggered a panic selloff. Also, the
volatility witnessed this January is partly attributed to the forthcoming inauguration of
President Trump who had vowed to implement US policy changes, further contributing
to the market disruptions.
Two major factors driving Bitcoin’s price drop:
1. Market Impact and Economic Data
Stronger U.S. economic data, particularly in the services sector and labour
market, have dampened hopes for aggressive Federal Reserve rate cuts in 2025.
A report by Finance Magnates states that this shift led to a rise in Treasury yields
and a stronger U.S. dollar, both of which have pressured the crypto market. Apart
from high Bitcoin liquidation, a wider $390 million total selloff has been witnessed
across the cryptocurrency market in one day.
2. Government and Institutional Selling Pressure
Further worsening the situation is the U.S. government’s planned sale of 69,370
Bitcoins, seized from the Silk Road marketplace. With a value of around $6.5
billion, the liquidation of such a large stash adds significant uncertainty to the
market. Additionally, outflows from Bitcoin ETFs and lower institutional
confidence are increasing the selling pressure.
With these factors at play, Bitcoin’s market outlook remains uncertain and challenging
for investors. While trading in cryptocurrencies can be rewarding, navigating the volatile
landscape at an uncertain time like this is very risky.