Why is Bitcoin Down Today? BTC Sees 10% Weekly Decline as Fed Policy Shifts

TLDR:

• Bitcoin dropped 10% to $94,645 in the week ending December 22, its first major weekly decline since Trump’s election
• The decline followed Fed’s reduction of projected 2024 interest rate cuts from five to two
• Bitcoin had previously risen in six of seven weeks since Trump’s victory, reaching an ATH of $108,135
• Technical indicators suggest potential further decline to support levels around $92,000
• Asset firms Bitwise and VanEck maintain bullish 2025 forecasts of $180,000-$200,000

Bitcoin experienced its first major weekly price decline since Donald Trump’s November election victory, dropping 10% to close at $94,645 for the week ending December 22, 2024. The decrease marked a stark contrast to the cryptocurrency’s recent bullish trend that had pushed it above $100,000.

The price correction wiped approximately $10,500 from Bitcoin’s value, which had started the week at $105,185. The decline came in the wake of the Federal Reserve’s latest policy announcement, which reduced projected interest rate cuts for 2024 from five to two, following its third consecutive rate reduction.

The Federal Reserve’s updated projections indicate the federal funds rate could settle near 3.9% in 2025, higher than the previously expected 3.4%. This adjustment creates a less favorable environment for risk-oriented assets, including Bitcoin and other cryptocurrencies.

Prior to this downturn, Bitcoin had demonstrated remarkable strength, posting gains in six out of seven weeks following Trump’s election victory. The only previous decline during this period was minimal, with a 0.78% retracement to $97,280 in the week ending November 24.

Technical analysis suggests potential further downside, with support levels identified around $92,000. The Moving Average Convergence Divergence (MACD) indicator shows persistent selling pressure, while the On-Balance Volume (OBV) continues to decline along a descending trend line.

Market observers note that the recent surge to the all-time high of $108,135 on December 17 may have represented a false breakout, as it wasn’t supported by corresponding volume increases. This technical weakness has contributed to the current price correction.

The cryptocurrency markets are closely watching the $92,100 level, which analysts consider pivotal for Bitcoin’s short-term direction. A bounce from this price point could maintain the overall bullish market structure, while a breakdown might lead to further declines toward the $88,900-$89,700 support zone.

Despite the current price weakness, major asset management firms maintain optimistic long-term outlooks. Bitwise and VanEck have projected Bitcoin prices in the range of $180,000 to $200,000 by 2025, citing potential catalysts such as a strategic US Bitcoin reserve and increasing institutional adoption.

The political landscape could also influence Bitcoin’s future trajectory. Trump’s nominated administration includes several crypto-friendly figures, including hedge fund manager Scott Bessent for Treasury Secretary and Cantor Fitzgerald CEO Howard Lutnik for Commerce Secretary.

The cryptocurrency community anticipates regulatory changes under the proposed leadership of Paul Atkins, who is set to replace Gary Gensler as SEC chair on January 20. Atkins, who previously served as an SEC commissioner from 2002 to 2008, is known for his pro-crypto stance.

Looking back, Bitcoin’s journey through 2024 has been remarkable. From trading around $43,610 on Christmas Day 2023, the cryptocurrency has more than doubled in value, even after the recent correction.

Trading volumes have shown recent weakness, with daily activity falling 4.18% below $50 billion. The market has also witnessed $40 million in long position liquidations over a 24-hour period, indicating leveraged traders being forced to close positions.

The cryptocurrency’s price action has drawn increased attention from retail and institutional investors alike. The approval and launch of spot Bitcoin ETFs earlier in the year marked a crucial milestone for mainstream adoption.

Current market conditions suggest a period of consolidation may be necessary before Bitcoin attempts to reclaim its recent highs. The price currently hovers around $96,073, representing an 11% decline from its all-time high.