Bitcoin rally in 2024 is starting to show signs of slowing down as it dropped 1.8% in the last 24 hours to $91,800. The largest cryptocurrency’s price has now fallen more than 14% from its December peak of $108,278, raising concerns of a potential correction. As the year closes, profit-taking from long-term holders and macroeconomic worries are weighing heavily on the crypto market.
Profit-Taking Pressure Mounts
After Bitcoin’s remarkable surge of over 117% this year, investors are increasingly cashing out their profits. The amount of profit-taking is currently surpassing $1.2 billion on a seven-day moving average, although this is lower than the peak of $4 billion seen earlier in December. Notably, most of the profits are coming from long-term holders who have kept their assets for several years, leading to substantial selling pressure.
The shift in sentiment has extended to the broader cryptocurrency market. Ether (ETH) has fallen 0.7% to $3,320, a 17% drop from its December highs, while Solana (SOL) has been a relative outperformer, with its SOL/BTC ratio up 0.35%. The CoinDesk 20, an index of the top 20 cryptocurrencies by market cap, has also slid 3.74%, with Ripple (XRP) and Stellar (XLM) bearing the brunt of the losses, down by 6% and 6.3%, respectively.
The Impact on Crypto-Related Stocks
The price slump in cryptocurrencies has also affected stocks of companies tied to the crypto industry. MicroStrategy (MSTR) and Coinbase (COIN) experienced declines of 7% and 5.3%, respectively, while major bitcoin mining companies such as Marathon Digital (MARA) and Riot Platforms (RIOT) saw their shares drop more than 7%. The sell-off underscores the interconnectedness of the crypto ecosystem with both digital asset prices and related equities.
Macroeconomic Factors Weigh on Market Sentiment
The downturn in the crypto market is being compounded by weaker-than-expected U.S. economic data. The Chicago PMI, which measures the performance of the manufacturing and non-manufacturing sectors in the Chicago area, posted its lowest reading since May, indicating a potential economic slowdown. Additionally, there is growing uncertainty surrounding the Federal Reserve’s interest rate policy, with the central bank indicating that it will pause rate cuts until at least March 2025.
Bitcoin profit-taking (Glassnode)
The political environment is also adding to market jitters, as the U.S. prepares for the inauguration of President-elect Donald Trump on January 20. These macroeconomic concerns have sent shockwaves through traditional markets as well, with major indices such as the S&P 500, Nasdaq, and Dow Jones all losing more than 1%.
Outlook for 2025: Consolidation and Potential Growth
Looking ahead, experts remain cautiously optimistic about Bitcoin’s long-term prospects. Joe Carlasare, partner at Amundsen Davis, notes that while the market has exceeded expectations in 2024, there are signs of exhaustion, suggesting a phase of consolidation may be in order. However, Carlasare is hopeful about Bitcoin’s adoption continuing to grow, predicting that it will move more in line with traditional markets in 2025.
“If the U.S. avoids a significant growth slowdown, Bitcoin should perform well, though the ride may be bumpier than in 2024,” Carlasare said.
Bitcoin’s ability to weather the current volatility will depend on a combination of factors, including macroeconomic developments, continued institutional adoption, and investor sentiment. As the market digests the gains of 2024, it’s likely to see more fluctuations in the short term before any sustained upward trajectory. However, for those holding long-term, the outlook remains positive, with many anticipating that Bitcoin will continue to play a significant role in the evolving financial landscape.
