Bitcoin posts first weekly decline since Donald Trump’s election win as the Federal Reserve’s dovish policy outlook tempers optimism about the president-elect’s embrace of cryptocurrencies.
The largest digital asset is down 9.5 percent over the seven-day period. The broader crypto market gauge, which includes smaller tokens such as Ethereum and meme-favorite Dogecoin, has suffered a sharp decline of about 12 percent.
The Fed on Wednesday delivered its third straight interest rate cut while signaling a slower pace of monetary easing next year to control inflation, sending global stocks into a tailspin. The hawkish pivot also dampened the speculative spirit unleashed in the crypto market by Trump’s pledge of friendly regulations and his support for a national bitcoin reserve. Sean McNulty, director of trading at Arbelus Markets, said record outflows from U.S. exchange-traded funds that invest directly in bitcoin last week will weigh on prices in the near term. “We should hold $90,000 for Bitcoin through the end of the year, but if we go below that it could trigger further liquidation,” McNulty said, adding that “meaningful negative hedging” was seen in the options market last week with large buyers of January, February and March options at $75,000 to $80,000.
The native cryptocurrency was trading around $96,000, about $12,000 below its record high set on Dec. 17. The cryptocurrency is still up about 40 percent since the Nov. 5 presidential election.
Volatile price action in the near term before an “upward trajectory” in the first quarter of 2025 remains the “most likely scenario,” David Lawant, head of research at crypto broker FalconX, wrote in a note.
Bitcoin posts first major weekly loss since Trump’s election rally
Despite the setback, people remain bullish on Bitcoin and expect it to surge to $200,000 by 2025 due to institutional adoption and favorable regulatory shifts under the incoming administration. Japanese company Meta planet took advantage of the decline with a record $60 million purchase of Bitcoin, while social sentiment hit a 2024 low. Bitcoin’s long-term outlook also remains very positive, supported by strategic proposals such as a U.S. Bitcoin reserve that could reduce the national debt.
The drop coincided with the Federal Reserve’s Federal Open Market Committee’s decision to reduce the number of interest rate cuts expected over the next year, reducing its forecast from five to just two. Analysts now expect the federal funds rate to peak at 3.9% in 2025, compared to the previously forecast 3.4%, creating a less favorable environment for risk-exposed assets like Bitcoin.
Before this decline, Bitcoin had shown consistent strength by rising in six of the past seven weekly closes since Trump’s election. The only exception was a slight 0.78% decline during the week ending November 24.
Despite this recent decline, optimism about Bitcoin’s long-term prospects remains strong. Asset management firms like Bitwise and Van Eck expect the cryptocurrency to surge to the $180,000 to $200,000 range by 2025, driven by the potential U.S. strategic Bitcoin reserve and increased institutional and corporate adoption.
The Trump administration is also expected to create a more favorable regulatory environment for cryptocurrencies. Some of Trump’s key appointments include hedge fund manager Scott as Treasury Secretary and Cantor Fitzgerald CEO Howard Lutnick as head of the Commerce Department.
Bitcoin Plunges: Will Trump’s Rally Return?
The cryptocurrency’s rally has slowed over the past few days, with Bitcoin (BTC) posting its first weekly decline since Donald Trump won the presidential election in early November. Bitcoin fell about 10% during the week ending December 22 after hitting an all-time high on December 16.
The latest drop came after the Federal Reserve gave a hawkish outlook for interest rate cuts in 2025. However, the cryptocurrency still has plenty of potential and is poised to rally in the near term as expectations continue to build on Trump’s crypto-friendly policies.
An Impressive 2024 for Bitcoin
Bitcoin started 2024 on a high note after the Securities and Exchange Commission approved 11 bitcoin exchange-traded funds in January. The cryptocurrency hit its first all-time high this year in March, hitting $73,750. However, the rally faded shortly after as the Fed delayed interest rate cuts and even the halving event in April failed to lift the cryptocurrency.
The rally returned in September after the Fed cut interest rates for the first time in over four years with a massive 50 basis point cut. Rally gained further momentum after Trump won the election, jumping nearly 50% in a month, hitting an all-time high of $106,533 on December 22.
The rally continues into the year ahead
Recent comments from the Fed have unsettled Bitcoin and the broader market, but investors still hold out hope for the incoming president, known for his crypto-friendly environment. Some of Trump’s key appointments include hedge fund manager Scott as Treasury Secretary and Cantor Fitzgerald CEO Howard as head of the Commerce Department.
