The much-anticipated Santa Claus rally to close out the fiscal year has left crypto enthusiasts hopeful, but the recent 24-hour performance of Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) suggests that this festive surge might not happen, or at least not immediately. These leading cryptocurrencies have fallen by 3.6%, 4.6%, and 5.7% respectively over the past day, as of 2:30 p.m. ET, hinting that the rally could be delayed or absent this year.
The holiday season typically sees reduced trading volumes across various assets, a trend mirrored in the crypto market. However, the significant selling pressure today has pushed Bitcoin below the critical $100,000 mark, with Ethereum lingering around $3,300 and Dogecoin trading at approximately $0.31. Let’s explore the factors behind today’s market movements.
No Santa Claus rally?
Despite the low trading volume, which usually implies less market volatility, today’s price action in cryptocurrencies has been unexpectedly dynamic. Discussions about the potential rise in interest rates and their adverse impact on risk assets, including cryptocurrencies, have led some investors to reconsider their investment strategies. The debate continues on whether Bitcoin should be viewed as a store of value akin to ‘digital gold’ or as a more speculative asset. This uncertainty is particularly poignant as higher interest rates could divert capital towards safer investments as the year ends.
Moreover, the crypto market has seen significant liquidation of long derivatives contracts, indicating that those betting on quick price increases for these tokens are pulling back, potentially exacerbating the downward price movement even on days with low trading activity.
With the U.S. dollar maintaining its strength and capital flowing out of various asset classes into money market funds, the crypto market might not see much cheer this holiday season, possibly leaving investors with more of a challenge than a gift.
What will 2025 bring?
Predicting short-term movements in any asset class, especially in the nascent crypto market which has only been around for about 15 years, is fraught with difficulty. However, historical data suggests that over the long term, most assets appreciate. A glance at Bitcoin’s long-term chart underscores the potential for significant growth over time, highlighting the power of compounding in this unique asset class.
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