Bitcoin (BTC) is facing volatility amid economic shifts and regulatory actions
Bitcoin (BTC) has faced significant market turmoil recently, reports Bitfinex Alpha. The cryptocurrency fell to a low of $91,430 last week, marking a decline of more than 15% from its record high of $108,100 in December 2024. This sharp decline is attributed to growing caution among investors, driven by rising US Treasury yields and ongoing outflows from… Spot Bitcoin ETFs.
Market influences and reactions
The increase in US Treasury yields, which reached a 14-month high of 4.79%, has shifted institutional investments away from riskier assets such as Bitcoin. This trend is exacerbated by the US Department of Justice’s announcement of the liquidation of $6.5 billion in Bitcoin seized from illegal activities, adding further pressure on the market.
Despite these challenges, Bitcoin remains resilient, showing a 42% increase since the US election, outperforming stocks that lost their post-election gains. However, as the Fed signals smaller interest rate cuts and tightening financial conditions, Bitcoin may face increased volatility in the near term.
Economic context and crypto developments
The US economy ended 2024 with strong job growth and an expanding services sector. December saw the addition of 256,000 non-farm jobs, exceeding expectations and reducing unemployment to 4.1%. This strong labor market, coupled with rising wages, supports consumer spending, the main driver of economic stability.
In the area of cryptocurrency regulation, the UK Treasury’s decision to exempt the share of cryptocurrencies from some regulatory frameworks provides clarity and encourages innovation in the blockchain industry. Meanwhile, Hong Kong’s introduction of a DLT supervisory incubator aims to strike a balance between innovation and risk management, setting a precedent for global regulatory practices.
Regulatory challenges and market sentiment
The announcement of the Department of Justice’s plan to sell $6.5 billion in bitcoin raised fears of increased market volatility, contributing to a 7.2% decline in the price of bitcoin. This regulatory action challenges the bullish sentiment that previously pushed Bitcoin to all-time highs, highlighting the impact of policy decisions on market dynamics.
Overall, while Bitcoin faces short-term challenges, the potential for pro-crypto regulation under the incoming administration of President-elect Donald Trump could strengthen its position in the long term, despite the immediate economic and regulatory hurdles.
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