Why Bitcoin, Ethereum, and Dogecoin Saw a Drop After Christmas

After Christmas, several major cryptocurrencies experienced a noticeable decline in value, marking a shift in market sentiment. Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE) have all faced selling pressure, indicating that the anticipated year-end rally, often referred to as the Santa Claus rally, may not be unfolding as many hoped.

In the 24 hours leading up to 2:30 p.m. ET, Bitcoin saw a decline of approximately 3.73%, Ethereum dropped around 4.45%, and Dogecoin fell about 6.12%. This has left Bitcoin trading below the crucial $100,000 level, while Ethereum settled near $3,300 and Dogecoin around $0.31.

No Santa Claus rally?

During holiday seasons, trading volumes generally decrease across various asset markets, including cryptocurrencies. Despite low trading volumes usually leading to little volatility, recent events have pushed the prices down significantly. Factors such as speculation surrounding rising interest rates are influencing investor perspectives on cryptocurrencies, which are often viewed as riskier assets.

The dilemma for Bitcoin investors revolves around its perceived role—whether it serves as a store of value akin to digital gold or functions more like a risky asset susceptible to market fluctuations. Current trends suggest that some investors might be using higher interest rates as a reason to withdraw from speculative investments, reallocating their capital into safer assets instead.

Moreover, there has been strong liquidation activity concerning long derivative contracts associated with Bitcoin, Ethereum, and Dogecoin. This indicates that investors who had previously bet on short-term price increases are now covering their positions, resulting in larger price swings than usual, especially during a time characterized by low trade activity.

With the U.S. dollar maintaining strength and money flowing away from various asset classes, including gold, toward more secure investments like money market funds, it appears that the current mood in the crypto market is cautious. The traditional expectations of a Christmas rally may instead lead to further downturns.

What lies ahead for 2025?

Predicting the immediate future of any asset class can prove difficult, particularly in the fast-moving world of cryptocurrency. Nevertheless, historical trends show that many assets tend to appreciate over the long term. Since its emergence about 15 years ago, Bitcoin has demonstrated that it can show significant growth over extended periods.

In conclusion, while the current market dynamics are leaning toward selling pressure in Bitcoin, Ethereum, and Dogecoin, the longer-term outlook might still provide hope for recovery, as it often does in the world of investing. Only time will reveal how this will play out in the coming weeks and years.

Bitcoin, Ethereum, Dogecoin