Bitcoin briefly plummeted below $91,000 before recovering some losses, spooking investors and triggering widespread concern across the cryptocurrency market.
The sudden drop raised alarm bells about the potential for a broader market crash, with analysts warning that the Federal Reserve’s actions could further exacerbate the situation.
Bitcoin peaked at nearly $110,000 in the days following the US presidential election results in an impressive crypto bull run over the prospects of Donald Trump returning to the White House.
However, Bitcoin’s value has been steadily declining over the last few days, signalling a possible correction after a brief euphoria.
The latest dip comes despite previous optimism about President-elect Trump’s plans to implement policies that could favor the cryptocurrency market.
“The start of the new year has not been easy for the crypto market,” Alex Kuptsikevich, chief market analyst at FxPro, said in a note to investors. “The next target for the bears looks to be the $88,000 area. And in a negative scenario, Bitcoin will face a quick pullback to $74,000,” he added.
With Bitcoin struggling, the broader cryptocurrency market is also facing significant losses.
The total market capitalization of all cryptocurrencies has dropped below the critical $3.2 trillion mark, fuelling concerns about a potential crash.
Kuptsikevich said that the market’s failure to maintain momentum could signal further declines, with investors now fearing another attempt to break below this threshold.
The recent decline in Bitcoin’s value is being driven in part by economic factors.
A stronger-than-expected US jobs report revealed that US added 256,000 jobs in December, far surpassing the expected 165,000.
The news dampened hopes for a reduction in interest rates by the Federal Reserve, leading to concerns that fewer rate cuts could make riskier assets like cryptocurrencies less attractive.
Markets have been on a slight downturn ever since the jobs report, with Bitcoin and other major cryptocurrencies such as Ethereum seeing losses. “Bitcoin needs to hold above $92,300 to gain momentum for further rallies, with resistance at $96,300,” said Edul Patel, CEO of Mudrex.
Major altcoins such as XRP, BNB, and Cardano have also seen significant declines, with many analysts advising caution.
While Bitcoin has tested the $100,000 level recently, its failure to maintain that price has raised fears that it could soon fall further. Sathvik Vishwanath, Co-Founder & CEO of Unocoin, stated that Bitcoin’s support at $92,000 could be tested once again, increasing the likelihood of a drop to $85,000.
