Why did the price of Bitcoin, Ethereum, and Dogecoin drop after Christmas?

So called Santa Claus walk Completing the fiscal year is a phenomenon that many hope to see in the world of cryptocurrencies. So far, movements have been seen over a 24-hour period Bitcoin (Bitcoin 0.06%), Ethereum (Ethereum 0.06%) and Dogecoin (Doug 1.06%) It suggests that such a rally towards the end of the year may take additional time to materialize, or may not materialize at all. This summit Cryptocurrencies They are down 3.6%, 4.6%, and 5.7%, respectively, over the past 24 hours, as of 2:30 PM ET.

Very weak trading volumes in stocks and other assets are common around the holidays, and there is a similar phenomenon in the world of cryptocurrencies. However, today’s selling pressure was noticeable, and has once again dragged Bitcoin below the key $100,000 limit, with Ethereum still hovering around $3,300 and Dogecoin trading at around $0.31.

Let’s dive into what’s driving today’s price action in these top digital assets.

No Santa Claus walk?

With very low trading volume, one might not expect to see much volatility. For stocks, that was the case today.

However, some interesting comments about the possibility that higher interest rates may now begin to detract from risky assets (including cryptocurrencies) have led some investors to rethink their basic investment thesis around this asset class. The question for Bitcoin holders is whether this asset is a store of value (like digital gold), or whether it represents a risky asset. I think the jury is still out on this one, as some investors clearly see rising interest rates as a negative for capital flows into more speculative or risky assets, with capital instead flowing into more safe haven assets to complete the year. .

From a speculation and trading perspective, long derivatives contracts also appear to be seeing strong liquidation activity, suggesting that leveraged bets on these three tokens in particular rising in a short period of time have been eliminated. The effects of having too much leverage within the cryptocurrency ecosystem can be significant on the way up, but this volatility can be a double-edged sword, with the potential for large price swings to the downside even on days when trading volume is relatively low.

With the dollar remaining very strong, and capital from most asset classes (including gold) continuing to flow in recent weeks towards money market funds, it is entirely possible that Santa is intent on giving all crypto investors a piece of coal over the next week. We’ll see.

What will 2025 bring?

One thing I’ve learned is that it’s impossible to predict with any degree of certainty where a particular asset class will go in the very short term. However, for most assets, the long-term path tends to be to the upside. And although cryptocurrencies as a sector have only been around for about 15 years, you only have to look at a long-term chart of a token like Bitcoin to get an idea that compounding can happen for a very, very long time.