Bitcoin’s price recently soared to a record high of $108,000, but it has since dropped sharply, leaving investors wondering what caused the sudden fall. While the earlier rally brought excitement to the market, several factors are now contributing to the downward trend.
If Bitcoin fails to break through its resistance level, it could drop further to around $95,000.
The Impact of the Fed’s Interest Rate Decision
One major reason for Bitcoin’s price decline is the upcoming interest rate decision by the U.S. Federal Reserve. Coinpedia News reports that there is a 96% chance the Fed will lower rates by 25 basis points. However, there are concerns about how the Fed will handle inflation moving forward.
Inflation reached 2.8% in November, and Fed Chair Jerome Powell’s comments on the 2025 rate outlook are drawing attention. If the Fed cuts rates more than expected in 2025, it could put significant pressure on the market.
Traders Cash In Their Profits
Another factor contributing to Bitcoin’s price drop is a wave of selling by short-term holders. Many traders who bought Bitcoin recently are now selling to lock in their profits after the rally. This type of selling is common when prices hit new highs, as traders seek to secure gains.
Long-term holders, who bought Bitcoin when it was trading between $90,000 and $100,000, are largely staying inactive. They may be waiting for more stable market conditions before deciding to act.
Bitcoin Is Correcting – But Don’t Panic!
Bitcoin’s past price cycles show that corrections are a natural part of its growth. In previous all-time highs, Bitcoin has experienced pullbacks of up to 34%. These short-term drops can erase weeks of gains, but they are considered a normal part of how the market behaves.
Analysts believe this correction might temporarily push Bitcoin below $100,000 before it stabilizes.
What’s Next for Bitcoin’s Price?
Currently, Bitcoin is trading around $104,000, marking a 2.93% decline in the past 24 hours. To maintain its upward momentum, Bitcoin needs to turn this new price peak into solid support. If it does, the price could rise past the highly anticipated $110,000 mark.
However, if Bitcoin struggles to break above this resistance and hold its position, it could face further declines, potentially retreating toward its next key support level at $95,651.
With so many factors at play, the next move for Bitcoin could reshape its path for the rest of the year – and 2025!
Source: https://coinpedia.org/news/key-reasons-why-bitcoin-price-is-down/