Bitcoin Falls as Trump Euphoria Gives Way to Fed Caution

On December 21, 2024By Littum

(Bloomberg) — Bitcoin is on pace for its first seven-day drop in eight weeks as hawkish signals from the Federal Reserve prompted traders to sell off an asset that has more than doubled this year.

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The native cryptocurrency fell as much as 5.3% to $92,149 on Friday after hitting an all-time high just above $108,000 earlier in the week. It’s down about 5% since Sunday and recently traded around $97,400 in New York. The decline weighed more heavily on smaller tokens ranging from Ether to Dogecoin, and came even as US stocks traded higher.

A group of U.S. exchange-traded funds investing directly in Bitcoin on Thursday snapped a 15-day streak of continuous inflows to post a record outflow of $680 million, according to data compiled by Bloomberg, underscoring the change in sentiment.

The increased volatility comes after cryptoassets staged a rally following Donald Trump’s victory in the US presidential election on November 5. Positioning had become “excessively bullish”, according to QCP Capital, leaving digital assets vulnerable to a change in tone from the Fed, which sharpens focus on bringing inflation back to target.

Uncertainty in crypto markets looks set to continue over the holiday as Trump prepares to take office and level threats of tariffs against US allies as well as adversaries. With the Fed likely to slow the pace of easing, the focus is on how quickly traditional financial firms adopt the asset class.

“The interplay between monetary policy, institutional adoption and political developments suggests that Bitcoin will remain sensitive to both macro and crypto-specific catalysts through 2025,” Hani Abuagla, senior market analyst at XTB, said in a note on Friday.

Open interest in Bitcoin futures at CME Group Inc. approached a record high on Tuesday but has since declined.

“Technically, caution is warranted in the near term,” Chris Weston, head of research at Pepperstone Group, wrote in a note. “This doesn’t mean we’re going to see a price drop anytime soon, but momentum has clearly come out of the move and buyers have lost dominance and control over the band.”