Bitcoin is back to a notable decline today by about 2% after two consecutive days of gains where it was unable to reclaim the $100,000 level again.
This led to sharper losses for altcoins such as Ethereum, which is struggling to reclaim the $3,500 level.
Bitcoin’s declines come amid relatively low market liquidity during the holiday season.
Also, the last week of the year and since 2021 has been a negative week for Bitcoin, so the seasonal factor may play a role in the renewed declines.
The seasonal factor also mixes with the low-risk appetite in the markets due to the exacerbation of concerns about the slow pace of interest rate cuts by the Federal Reserve next year after the last meeting, in addition to the return of the negative data flow earlier this week.
Meanwhile, sentiment remains very low regarding a rate cut next year, with the probability of a cut in January not exceeding 8% and 43% in March.
Therefore, markets may wait for the return of favorableeconomic data to re- ignite risk appetite and stock market gains that in turn drive the overall trends of cryptocurrencies.
Markets will also be waiting for the actions and policies that Donald Trump may implement in line with his previous campaign promises to support the adoption of this sector and create a favorable regulatory environment. Everything that happened from his election victory and the promises he made have already been reflected in prices, and therefore markets will need more positive developments to fuel the upward trend.
This may include clarifying the features of the new regulatory environment governing the sector and enacting legislative frameworks that will establish a state of certainty among traders, paving the way for widespread adoption, especially from large institutions such as banks.
If we look at the behavior of investors in the futures market, we find that the picture is mixed and tends to be negative. With the gradual decline in futures market activity, we see short sellers advancing in an attempt to wrest control from buyers. According to CoinGlass, Bitcoin futures open interest dropped below $60 billion today for the first time in two weeks.
The long/short ratio has fallen below 1 threshold after two days of consolidation just above it. The continuation of this trend in the futures market in conjunction with the decline in prices may indicate that the downtrend may continue.
However, the futures market is extremely volatile, and these trends may see sudden reversals with changes in market fundamentals.
