- The crypto rally has lost momentum.
- Uncertainty around Trump’s policies and the Fed’s hawkishness hold it back, analysts say.
- But they still anticipate Bitcoin to reach record heights in 2025.
It’s Trumponomics.
That’s basically the answer you get when you check for reasons behind why Bitcoin dropped below $93,000 over the past 24 hours.
More precisely, analysts point at the minutes from the Federal Open Markets Committee’s December meeting, released on Wednesday, as a key catalyst behind the crypto market’s plunge.
The Fed minutes “confirm that the Trump administration and its policy implications were the main drivers of the Fed’s hawkish shift,” Peter Chung and Min Jung, analysts at Presto Labs, wrote in a Thursday research note.
It counters the conventional narrative that Donald Trump’s second presidency will kickstart an unprecedented crypto rally. Trump has promised to cut red tape the crypto industry said was holding it back.
The new Trump era was seen catapulting Bitcoin to $200,000 in 2025, and pull the rest of the crypto market along with it, analysts said.
While Bitcoin’s 14% drop from its $108,135 record may fuel doubts, analysts say the rally is still very much on track, but that investors should be patient.
“A breakout will happen when the market completes its recalibration process and uncertainty clears,” Presto Labs’ analysts write.
When’s that? It’s unclear.
“Signals for this will likely emerge after Trump’s January 20 inauguration and gradually take shape during his first 100 days in office. Be patient and stay tuned,” Chung and Jung wrote.
What’s behind Bitcoin’s drop?
Crypto markets pumped hard on the back of Trump’s election win. Both Bitcoin and Solana notched new records and cryptocurrencies like XRP hit levels not seen in years.
Then the rally lost momentum. The crypto market’s value has fallen 10% since its December high to just under $3.5 trillion, according to CoinGecko.
A similar slump can be seen in the benchmark S&P 500 index, which slumped 2% during the same period. Stocks are relatively risky assets that tend to react to the same macroeconomic factors as cryptocurrencies, such as Fed policy.
“The recent slump is to be expected,” GSR analyst Carlos Guzman told DL News.
He argued that many major positive market catalysts — such as Trump nominating crypto-backers to key governmental positions — “have now passed.”
But Guzman argued that the downturn is just a pause.
“We retain a positive view of the market for 2025 in large part given expectations for improved US regulatory clarity and pro-crypto policy, but these catalysts will take longer to play out,” he said.
What’s next?
In the short-term, Guzman sees several factors drive the rally.
Those include more pro-crypt nominations from Trump, new nominations to key regulator positions, and the FTX bankruptcy payout kicking off in February, which could see between $2 and $8 billion return to crypto markets.
The wobbly Chinese economy could also supercharge Bitcoin’s rally, David Brickell, head of international distribution at FRNT Financial, told DL News earlier this week.
As the value of the yuan drops, the capital outflows out of China will only accelerate.
“Bitcoin will be an obvious destination for some of those flows, especially with capital controls in place making it difficult to get capital out of China via traditional channels,” Brickell said.
Seasonal cycles will likely push Bitcoin to a new peak at the end of this quarter, BitMEX founder Arthur Hayes said this week.
The chief investment officer at investment fund Maelstrom encouraged investors to consider last year’s price pattern and “sell in the late stages of the first quarter” and wait until “positive fiat liquidity conditions” return in the third quarter.
Crypto market movers
- Bitcoin is down 1.6% over the past 24 hours to trade at $93,353.
- Ethereum is down 2% to trade at $3,294.
What we’re reading
- These five charts show why DeFi loves giving away billions via airdrops ― DL News
- The Chopping Block: Scarcity vs. Abundance, AI’s Crypto Role, and Virtuals ― Unchained
- What the hell happened yesterday? ― Milk Road
- 2025 Will Be a Year of Crypto Competition. Can Ethereum Make a Comeback? ― Unchained
- Arthur Hayes turns up the ‘risk dial’ on these seven DeSci tokens ― DL News
Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.