The crypto market found itself in the throes of a sharp selloff on Wednesday, with bitcoin leading the plunge as it erased nearly all of its gains from the start of the year. The largest cryptocurrency by market cap slid to a session low of $92,600 during U.S. trading hours, shedding close to 10% in a mere 48 hours from its Monday peak above $102,000. While it managed to recoup some losses, recently trading around the $94,300 mark, bitcoin remained down 2.5% on the day.
This violent two-day tumble liquidated nearly $1 billion worth of leveraged derivatives positions across various crypto assets, with long positions betting on higher prices bearing the brunt of the damage, according to data from CoinGlass. The abrupt downturn also briefly pushed bitcoin below its opening price at the start of 2025, though at current levels it was still clinging to a 1% year-to-date gain.
Broad-based Crypto Rout Spares Few
Bitcoin was far from alone in its suffering, as the wider crypto market experienced a broad-based pullback. Cardano’s ADA, Render’s RNDR, and Aptos’ APT led the losses among constituents of the CoinDesk 20 Index, a measure of the leading cryptocurrencies and tokens. The index itself shed over 3% during the same period.
Crypto-exposed equities likewise found themselves caught in the undertow. A swathe of bitcoin mining firms saw their shares tumble between 5% and 8%, with notables including TeraWulf (WULF), Bit Digital (BTBT), Bitdeer (BTDR), IREN (IREN), and Hut 8 (HUT). Even MicroStrategy (MSTR), known for its substantial bitcoin treasury holdings, slipped 2.2%. Semler Scientific, which had followed in MicroStrategy’s footsteps by adopting a BTC reserve strategy, plunged 10% on the day and has now shed approximately 40% since topping out in late December.
Macro Headwinds, Rate Hike Uncertainty Fuel Risk-Off Pivot
The risk-averse sentiment that enveloped crypto was largely fueled by mounting macroeconomic headwinds. Strong U.S. economic data released on Tuesday, in particular, served to accelerate the global bond rout already in play by prompting investors to scale back their bets on the extent to which the Federal Reserve might cut rates over the balance of the year.
However, remarks from Fed governor Christopher J. Waller on Wednesday, voicing his support for additional rate cuts as the year progresses, aimed to tamp down inflation concerns stoked by the prospect of incoming President Donald Trump’s potential shift toward a tariff-centric trade policy. Those comments, though, failed to meaningfully sway the market’s outlook on the interest rate trajectory.
Underscoring the challenging backdrop, minutes from the Fed’s most recent policy gathering, published Wednesday afternoon, revealed that a majority of officials believed upside inflation risks had increased. The minutes also hinted at some trepidation that Trump’s tariff agenda could exert greater upward pressure on prices than initially anticipated.
Analysts See Bitcoin Consolidation, Election-Driven Bounce
With bitcoin now probing the lower bound of its trading range that has largely held since November, the path of least resistance appears skewed to the downside in the near term. That said, many analysts see scope for a short-term bounce from current levels.
Doesn’t have to be uber bearish, but we might need to fiddle around in a range and get more comfortable with $100k prints before we can really leave this area behind.
Bob Loukas, founder of Station3 NYC
In the eyes of crypto hedge fund QCP, bitcoin’s current retracement likely represents a mere pause within a broader bullish upcycle. The firm expects BTC to catch a bid as Donald Trump’s inauguration on January 20 approaches, potentially kindling fresh optimism in risk assets.
With market anticipation building, we believe bitcoin’s pullback is merely a pause, setting the stage for a bullish rally as Trump’s inauguration fuels optimism.
QCP analysts
In terms of crucial events to watch, analysts flagged Friday’s release of U.S. nonfarm payrolls data and the upcoming Fed policy meeting slated for later this month as key potential catalysts for the bitcoin price vector.
While the jury remains out on bitcoin’s precise short-term trajectory, one thing appears certain: the flagship cryptocurrency is poised for a period of consolidation as it digests the recent selloff and gathers itself for its next big move. Whether that ultimately resolves to the upside or portends additional downside will likely hinge on the macroeconomic currents and policy developments that materialize in the coming days and weeks.
