Why The Crypto Market Is Crashing as Bitcoin’s Value Drops
Various factors influence the latest crypto market downturn as Bitcoin notes similar price performances in January of any post-halving year.
The crypto market has been witnessing a significant slump in recent weeks. Its market cap reached $3.7 trillion in mid-December when Bitcoin (BTC) touched an ATH of over $107,000.
However, weeks later, Bitcoin has slumped below $94,000, while the total market cap is hovering below $3.25 trillion. The BTC price decline has also affected popular altcoins such as Ethereum, Solana, and Dogecoin.
The prices of these digital assets have dropped by double digits. As is often the case, altcoins’ price direction usually follows BTC’s price movement. Hence, the current trend is no different.
Whale Activity Signals Uncertainty in Crypto Market
Ali Martinez, a famous crypto analyst, shared insights into Bitcoin transactions. He revealed a 51.64% decline in large BTC transactions over the last month, dropping from 33,450 to 16,180.
According to him, this reduced activity indicates a cautious sentiment among large investors as they await clarity on political and macroeconomic events. Martinez also mentioned an almost 57% drop in funds inflow into the crypto market in the last 30 days.
Whales’ inactivity is often a sign of market uncertainty, leading to fear and doubts for other smaller investors. Meanwhile, Santiment, a leading blockchain analytics platform, noted that the current drop in trading volume across top projects is the lowest since November 4, 2024.
Santiment stated that the imminent political change in the US, especially the inauguration of President-elect Donald Trump in the next seven days, is also a cause of the crypto market’s downtrend. However, the platform remarked that low whale activity can sometimes cause rebounds in the market.
Bitcoin’s January Slumps: A Tradition
Meanwhile, analysts believe a price correction for BTC in January of a post-halving year is not unprecedented. According to them, the recent 10% slip confirms historical patterns.
Bitcoin’s price dropped from $102,300 on January 7 to below $92,000 before recovering to $94,000. The decline is significant but, for the seasoned investor, part of a predictable cycle.
Crypto analyst Axel Bitblaze stated in a social media post that similar dips happened in January 2017 and January 2021, which were post-halving years as well. In January 2017, the coin fell by 30% but surged by 2,400% throughout the year to trade at $20,000.
In January of 2021, Bitcoin’s price slumped 25% before it rallied by 130% to $69,000 in November of the same year. This cyclical performance of Bitcoin reflects its maturation as an asset class.
Though the crypto market remains volatile, its performance over the long term suggests there’s room for growth.
Crypto Market Analysts Remain Optimistic
Like Bitblaze, other analysts are bullish about the crypto market’s prospects despite the current slump. Another crypto analyst, Crypto Rover, said Bitcoin has fallen on the first day of each month this past year.
Stockmoney Lizards, another popular crypto analyst, remains confident that this cycle hasn’t finished its potential upside. He added that mass adoption, crypto-friendly policies, and the approval of other spot crypto ETFs would help sustain the crypto market’s bullish trend.
Bitcoin could trade at over $200,000 by the end of 2025 if it mimics previous cycles’ average percentage rise of 130%. On the other hand, major pullbacks that resemble those in previous cycles could push its price below $70,000.
The analysts believe that continuous developments in blockchain technology and the growing interest of institutions will positively influence the crypto market. Hence, the industry will become less vulnerable to extreme volatility and achieve stability similar to traditional financial markets.
Over $400M in Crypto Liquidations
Meanwhile, CoinGlass data showed that over 170,000 traders were liquidated within the past day, causing over $400 million in crypto liquidations. The data further showed that Binance recorded the largest single liquidation order of $8.21 million in BTC/USD.
The largest liquidations occurred among holders of BTC, XRP, ETH, DOGE, SUI, and SOL. The liquidations indicate traders’ cautiousness after the latest jobs data showed a strong US economy.
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