After a period of gains, the cryptocurrency market experienced a breather on Tuesday. Bitcoin , after recently exceeding $126,000, saw a quick decline. Analysts suggest that the recent surge may have been unsustainable in the immediate future.
The price of BTC slipped under $122,000, effectively reversing the gains made in the previous three days. It traded down by 2.4% over a 24-hour period. This downturn affected other cryptocurrencies as well. , , , and all saw declines of 5%-7%.
Bitcoin’s price behavior is not new. Even with a 31% increase since the start of the year, opportunities for long-term holders to celebrate have been limited. Each time it hits a high point, it quickly faces selling pressure. A similar instance happened before January’s Trump inauguration when Bitcoin rose to $109,000, only to fall to $100,000 within hours and then further to $75,000 within three months.
In July, the initial rise above $123,000 was followed by a roughly 10% decrease in the subsequent days. A comparable surge past $120,000 in mid-August was a signal for a roughly 15% drop in the days that followed.
This recent downward trend follows Bitcoin’s sharp 16% climb from late September lows under $109,000.
Jean-David Péquignot, Chief Commercial Officer at Deribit, a marketplace for options, suggested in a report released on Monday that Bitcoin may fall back to the $118,000-$120,000 range. This could push out traders who entered the market late and missed the initial low prices. He believes this dip would create a good buying opportunity, as technical factors and the overall economic climate point to potential gains above $130,000 in the final quarter of the year.
According to Vetle Lunde, Head of Research at K33, derivatives market activity and ETF inflows have also become excessive. He pointed out that the past week saw the strongest accumulation of Bitcoin this year, with a combined addition of 63,083 BTC (approximately $7.7 billion) across U.S. ETFs, CME, and perpetual futures. This surpassed the peak seen in May. The rise was driven by widespread buying positions with expectations of price increases, but without strong economic support, leading to conditions ripe for a pullback.
“Historically, similar surges in exposure have often indicated short-term peaks, and the current situation suggests a market that is temporarily overheated, with a higher risk of consolidation in the short term,” Lunde explained.
Fed’s Miran Says Neutral Rate Should Be 0.5%
Federal Reserve Governor Stephen Miran, a recent appointee, stated during a discussion on Tuesday that his view of the neutral interest rate has significantly shifted. He now believes it should be at 0.5%. Miran cited stricter immigration policies and changing views about the federal deficit as key reasons for his changed assessment.
Miran’s remarks indicate potential shifts in the factors shaping the U.S. economy long-term. A reduced labor pool could slow economic growth, and rising fiscal pressures may complicate the Federal Reserve’s efforts to manage inflation and employment. His comments come amidst debates about how much room the central bank has to lower rates without causing inflation to rise again.
Federal Reserve officials will meet later this month to consider another possible rate cut, but this will happen without having access to important government data due to the current shutdown.
Miran also mentioned that economic growth during the first half of the year was slower than expected due to uncertainty regarding trade and tax policy. However, he expressed optimism for the coming months, suggesting that much of that uncertainty has diminished. “With clearer policy signals, I anticipate a more stable rate of growth,” he said.
Crypto Stocks Experience Declines
The overall decrease in cryptocurrency values is affecting related stocks. Strategy (MSTR) experienced a significant drop of 7%, while Coinbase (COIN) saw a 4% decrease. Ether -related firms Bitmine Immersion (BMNR) and Sharplink Gaming (SBET) decreased by 3% and 7%, respectively.
Most Bitcoin mining companies are also showing losses, with MARA Holdings down by 4% and Riot Platforms (RIOT) decreasing by 3%. Hut 8 (HUT) is down by 2%.