Bitcoin (BTC) has declined by 3.9% this week,
trading at $93,347, and is now 6.3% below its all-time high of $99,658. The
cryptocurrency briefly touched lows of $90,872, marking a 9.0% retreat from its
peak. While there are no clear fundamental drivers behind this correction, it
could be partially attributed to the proposed additional import tariffs from
President-elect Donald Trump or hawkish rhetoric from the Federal Reserve
(Fed).
Despite the short-term pullback, the mid-term
outlook for Bitcoin in 2025 appears highly promising. With a new crypto-friendly
Chair expected to lead the U.S. Securities and Exchange Commission, regulatory
pressure on the cryptocurrency industry is likely to ease. Furthermore,
President-elect Trump has proposed the creation of a national Bitcoin reserve,
which could significantly boost market sentiment. These factors have the
potential to propel Bitcoin prices to $200,000 in the first half of 2025.
However, the current correction has been
exacerbated by leveraged retail investors seeking outsized gains. A 3.3% drop
on Monday alone triggered $500 million worth of long position liquidations.
Institutional investors are also showing signs of caution, with Bitcoin ETFs
such as BlackRock’s IBIT, Fidelity’s FBTC, and Grayscale’s GBTC reporting net
inflows of $1.2 billion last week, down from $2.29 billion in the previous
week. This week, spot Bitcoin ETFs have recorded net outflows of $435 million.
The ongoing selling pressure is expected to
persist until retail investors reduce their risk appetite and leverage trading
returns to normal levels. This correction is likely to be shorter and less
severe than the previous one seen in 2024, where Bitcoin fell 33.7% from
$73,864 to $49,035 over five months. The anticipated size of the current
correction is estimated at no more than 25.0%, potentially bringing prices to
$75,000.
Most options market strikes are concentrated
between $85,000 and $100,000. This points to a potential buying opportunity
within the $75,000–85,000 range over the next 1-2 months, as the market
stabilises.