Bitcoin Records First Weekly Drop Since Trump’s Election Victory

The world’s largest cryptocurrency, Bitcoin, suffered its first weekly decline since President-elect Donald Trump won the U.S. elections. This drop illustrates the effect of the vastly more guarded monetary policy of the Federal Reserve in its caution, which quashed the optimism that followed Trump’s nod to crypto because of his BET-on-BLOCKCHAIN remark.

A Sharp Decline for Bitcoin

In the past week, Bitcoin has declined by 7%, its biggest decline since September. Bitcoin fell as low as around $94,344 on Monday morning in Singapore, after reaching a high of $108,000 on December 17. In only a few weeks, it’s dropped $14,000.

The broader cryptocurrency market has felt the effect as well. Even sharper down 10% was a comprehensive market index, tracking smaller cryptocurrencies such as Ether and Dogecoin.

Federal Reserve’s Policy Shift

Recent monetary policy announcements from the Federal Reserve have acted on Bitcoin’s price movements. The Fed cut interest rates for a third straight time last Wednesday but promised to be more guarded on easing the monetary tap in the next year. This move is to alleviate inflation but dampens speculative activities on the financial markets, ranging from cryptocurrencies.

The Fed’s hawkish pivot is a dramatic contrast to the optimism created by Trump’s election victory. Bitcoin’s rally in the weeks after the election was backed by Trump’s promises of favourable crypto regulations and even a national Bitcoin reserve.

Impact on the Broader Market

Most nations experienced sell-offs in global equity markets, added to this the federal reserves policy shifted and investors’ sentiment took a hit. The significant outflows from U.S. exchange-traded funds (ETFs) that invest directly into Bitcoin were also a factor in a broader market correction. Sean McNulty, director of trading at Arbelos Markets, said that such a trend could batten down on Bitcoin prices over the short term.

McNulty suggested we should hold the $90,000 level for Bitcoin until the year’s end. “If we break below that, then it could just cause more liquidations.” Large buyers were looking at puts at $75,000 to $80,000 strike prices on January, February, and March with increased demand for downside hedging in the options market last week, he noted.

Optimism for 2025

Although faced with an ocean of turbulence recently, Bitcoin’s medium to long-term outlook is still appealing to most analysts. While short-term volatility is expected to continue, FalconX head of research David Lawant predicted that a bullish trend will resume in the first quarter of 2025.

The current low liquidity environment can reinforce price volatility at year-end, Lawant said. We should keep an eye out for the upcoming options expiry event on the 27th of December as it may help contribute to further market swings. Lawant told CoinDesk that it will be ‘the biggest options expiry event in crypto history.’

Key Players to Watch

Also keeping an eye on the market is MicroStrategy Inc., a software company turned crypto proxy. But it’s worth noting that MicroStrategy has bought huge amounts of Bitcoin in the past and may have an impact on the direction of Bitcoin’s price in the weeks ahead. MicroStrategy is in line to continue its weekly Bitcoin buying spree, which could act as a catalyst for the cryptocurrency to hit its next price trigger.

Historical Context

Bitcoin’s latest fall comes after a spectacular growth period. Investors have driven up Bitcoin’s price by nearly 37% since November 5, when Trump was elected, encouraged by his pro-crypto policies. But the downturn just reminds us how volatile the cryptocurrency can be and sensitive to macroeconomic factors.

Future Outlook

Ahead of Bitcoin’s end of 2024, how the coin performs will hinge on an intersection of monetary policy, regulatory actions, and market psychology. In the short term the $90,000 level could be a critical support level, say analysts. The level is broken below, signalling further sell-offs, it still holds and could signal a rebound.

But the coming event of options expiry on December 27 will also prove crucial for the market. Those traders may either reinforce or weaken this market by choosing to position themselves either way based on this event.

Bitcoin’s Volatility and Future Prospects

Bitcoin is entering tampering territory, as its first weekly drop since Trump’s election victory underscores how geopolitics affect cryptocurrency markets. Introduced by the Federal Reserve’s cautious stance, short-term challenges beget long-term opportunities for Bitcoin. As the year ends, investors should be prepared for possible volatility in MicroStrategy’s buying patterns, and be ready to pay attention to end-of-the-month options expiry (December 27 for MicroStrategy) and key such updates.

Where the crypto market is concerned, the fact that it is maturing does not imply that its dynamics also change; there are opportunities and threats alike for traders and investors.