Why Is Crypto Crashing? FED’s Tightening Stance and Silk Road BTC Sale Impact Bitcoin
Recently, the total cryptocurrency market has fallen below $3.2 trillion, with losses of more than $300 billion since January 6. Bitcoin (BTC) is currently sitting above $92,000, showing a trend higher from the lows since December 30.
Adding to the bearish sentiment, Report It shows that the US government has been approved to sell 69,370 BTC ($6.5B) seized by Silk Road. This has heightened political tensions as President-elect Donald Trump, who will be inaugurated on January 20, has pledged not to sell any of the 187,236 Bitcoins held by the US government.
Are sell-off fears overblown?
However, analyst Van Straten believes that concerns about a sell-off may be exaggerated Because the potential sale of 69,370 BTC may be in order and may already be priced by the market.
Secondly, he pointed out that since September, the market has absorbed more than 1 million Bitcoins, with the price of Bitcoin rising from $60,000 to over $100,000. The analyst also pointed out that when the German government sold 50,000 BTC in mid-2023, the market had already priced it in, and even though they still held some BTC, the price had bottomed out at around $55,000, indicating that such sales were not have a significant impact on the market.
Outlook remains bearish
QCP Capital in Telegram broadcast Share that Bitcoin rebounded to $95.2K last night after successfully retesting the key support level of $92.5K. However, the outlook for Bitcoin remains bearish in early Asian trade today following news that the U.S. government was selling its seized Silk Road Bitcoins.
Traders at QCP noted that cryptocurrency prices continue to be weighed down by macro headwinds, with last night’s Federal Reserve meeting minutes showing an increasingly hawkish stance. The Federal Reserve said it would slow down the pace of interest rate cuts in light of rising inflation risks.
In addition, yesterday’s ADP employment survey also added to macro uncertainty, showing that both private sector hiring and wage growth slowed. That contrasts with Tuesday’s JOLTS job openings, which painted a stronger picture of the labor market.
In the options market, longer-term contracts experience increased volatility, while short-term options experience less volatility. With U.S. markets closed today, QCP expects Bitcoin (BTC) to remain weak and likely trade between $92,000 and $95,000. However, if the price of Bitcoin falls below $92,000, it may continue to fall, potentially reaching $90,000.
