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Bitcoin Slides and Stocks Tumble: Fed’s Move Shakes The Market
News On Bitcoin - Week 52 2024
TL;DR
BTC is down
Bitcoin dominance is down
MicroStrategy's Bold Bitcoin Expansion and Share Plans
KULR Technology Invests $21M in Bitcoin Treasury
UAE's Alleged $40 Billion Bitcoin Holdings Spark Debate
Russia Adopts Bitcoin to Circumvent Sanctions
Canadian Matador Technologies Adds Bitcoin to Treasury
IRS Confirms Taxation of Staking Rewards
Russia Bans Crypto Mining in 10 Regions for Six Years
Kyrgyzstan’s Crypto Mining Tax Revenue Declines 50% in 2024
Crypto and AI Growth Strain North American Energy Grids
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Bitcoin Price
Crypto is down this week, with BTC down by 1.3% and ETH down by 1.9%:
Bitcoin dominance has decreased over the week, starting from 55.2% to a high of 56.04% and ending at 54.8%. Investor sentiment, regulatory changes, technological advancements, and the overall growth of the cryptocurrency sector shape Bitcoin's market dominance. Its reputation as "digital gold" also enhances its position, making it a key player in the market.
Bitcoin has shown renewed bullish momentum after a brief correction to $92,458 on December 23, climbing 6.5% to its current level near $95,659.
Despite the bounce, the cryptocurrency faces resistance at $98,000, a threshold it must overcome to sustain further gains. Market participants remain optimistic, citing robust derivatives data and favorable macroeconomic conditions as key drivers for a potential rally toward $105,000.
In the derivatives market, Bitcoin’s 2-month futures contracts are trading at a 12% annualized premium over spot prices, signaling strong demand for leveraged long positions. Typically, a premium between 5% and 10% is considered neutral.
This elevated level indicates confidence among traders, despite recent price volatility. Similarly, options data shows put (sell) options trading at a 2% discount to equivalent call (buy) options, reflecting low demand for downside protection. This consistent trend underscores the market’s neutral-to-bullish stance.
Broader financial market trends also support Bitcoin’s upward trajectory. The S&P 500 index erased its December losses on December 24, buoyed by improved investor sentiment.
Additionally, the U.S. 10-year Treasury yield climbed from 4.23% to 4.59% over two weeks, reflecting heightened inflation expectations.
In such environments, Bitcoin and other scarce assets often perform well as investors seek alternatives to fiat-based instruments. Rising yields, however, could temper risk appetite, potentially limiting Bitcoin’s gains.
Despite bullish indicators, Bitcoin’s price action has not been without disruption. A technical glitch on TradingView’s dominance chart on December 26 caused Bitcoin dominance to briefly display as zero, triggering a 4% drop to $95,000.
The anomaly prompted liquidations of approximately $33 million in long positions as traders reacted to the unexpected volatility. The market quickly stabilized, but the event highlighted the fragility of investor sentiment in uncertain conditions.
Analysts remain divided on Bitcoin’s near-term prospects. Breaking the $98,000 resistance is critical to unlocking a path toward $105,000, with some forecasting a move to $120,000 or higher in early 2025.
Short-term technical indicators suggest the potential for a bullish breakout, particularly if trading volumes increase. However, Bitcoin’s 64% correlation with the S&P 500 raises concerns that broader market weakness could weigh on its performance.
Macroeconomic policy continues to loom large over financial markets, with the Federal Reserve adjusting its rate-cut projections for 2025. The central bank now anticipates only two rate reductions, down from the previously expected four, signaling a less accommodative stance.
While this reduces immediate concerns over corporate earnings and real estate financing, it adds uncertainty to Bitcoin’s long-term outlook, particularly as inflation remains a key variable.
Margin market data provides additional context for Bitcoin’s trajectory. The long-to-short ratio on OKX is at a bullish 25:1, reflecting strong confidence among leveraged traders.
Historically, extreme ratios above 40:1 have preceded corrections, making the current level cautiously optimistic. Analysts warn that excessive leverage could amplify price swings, especially near critical resistance levels.
In the coming weeks, Bitcoin’s performance will hinge on its ability to break above $98,000 and sustain momentum. Broader financial conditions, including equity market trends and inflationary pressures, will play a pivotal role.
While optimism is high, risks of economic stagnation and regulatory uncertainty remain. Traders should watch key technical indicators and macroeconomic signals closely as Bitcoin navigates its path forward.
Bitcoin (BTCUSD) Analysis:
As of December 27, 2024, Bitcoin (BTC) is trading at $95,659. Key support is at $92,000, with resistance at $98,000. A break above $98,000 could target $105,000, while losing $92,000 risks a drop to $90,000.
Medium-term support is at $85,000, with a $105,000 target intact. The long-term trend remains bullish, with resistance at $120,000 indicating potential gains into 2025.
Bitcoin (BTC): Support at $92,000; Resistance at $98,000.
Market Outlook:
Bitcoin remains bullish, supported by strong derivatives demand and favorable macro trends. A break above $98,000 could drive further gains, while macroeconomic risks like inflation and rate policy may influence volatility.
BTC/ETH ratio has seen an increase:
Over the last 6 days, the BTC to ETH conversion rate has experienced a general decrease. Starting at 29.17 ETH on December 21, 2024, it dropped to 28.68 ETH by December 26, 2024, representing a decline of 1.69 ETH. The largest drop occurred on December 23, 2024, with a 4.36% decrease, while the most recent increase was a 0.90% rise on December 26. Overall, despite some daily
“This will sound shocking now, but I am confident it will age well: Bitcoin is a revolution in human consciousness.”
Financial News
MicroStrategy has strengthened its position as a leading Bitcoin holder by acquiring 5,262 BTC for $561 million, raising its total holdings to 444,262 BTC purchased at an average price of $62,257 per coin.
The firm, led by Michael Saylor, also announced plans to increase its authorized share count by $10 billion, potentially expanding shares by 3,000%, to fund further Bitcoin purchases. These moves come as the company reports strong year-to-date BTC yields of 73.7% and celebrates its inclusion in the Nasdaq 100 index, reflecting its growing market influence and commitment to a Bitcoin-centric strategy.
KULR Technology Group, listed on the NYSE, has launched its Bitcoin treasury with a $21 million purchase of 217.18 BTC at an average price of $96,556 per Bitcoin. The energy management company plans to allocate up to 90% of surplus cash into Bitcoin, utilizing Coinbase Prime for custody services.
Inspired by MicroStrategy’s strategy, CEO Michael Mo described Bitcoin as "digital energy" aligning with KULR's mission. This move reflects a growing trend among firms adding Bitcoin to their balance sheets, including Matador Technologies and Quantum BioPharma, further cementing Bitcoin’s role as a strategic asset in corporate finance.
Rumors suggest the UAE may own $40 billion in Bitcoin, positioning it as one of the largest holders globally. The claim, sparked by a tweet from Binance CEO Changpeng Zhao (CZ), remains unverified, with experts questioning its credibility.
Irina Heaver, a blockchain lawyer, labeled the source unreliable, while Bitcoin Archive dismissed the story as “fake news.” Despite skepticism, the UAE's robust digital asset strategy, including its AE Coin stablecoin, tax exemptions, and $34 billion in crypto inflows, makes significant Bitcoin investment plausible. If confirmed, the UAE's holdings could reshape Bitcoin's role as a national reserve asset.
Bitcoin displayed remarkable resilience during the year’s final options expiry on Dec. 27, despite $14.2 billion worth of contracts expiring at an $85,000 "max pain" point. BTC briefly surged past $97,330 post-expiry, hinting at robust market confidence. Analysts project Bitcoin could reach $110,000 by January, supported by strong ETF inflows totaling $475 million after Christmas.
With ETFs accounting for 75% of Bitcoin’s 2024 investments, institutional liquidity may bolster prices above $105,000. Resistance looms at $98,000, where liquidations could exceed $885 million. Optimistic forecasts see Bitcoin reaching $160,000 in 2025, driven by favorable macroeconomic trends and US financial policies.
Galaxy Research predicts the US government will not purchase Bitcoin in 2025 but will safeguard its current holdings of 183,850 BTC, valued at $17.36 billion. While an expanded Bitcoin reserve policy may be explored, direct acquisitions are deemed unlikely.
Senator Cynthia Lummis’ proposed Bitcoin Act 2024 suggests annual purchases of 200,000 BTC over five years, but its passage remains uncertain. Analysts anticipate competition among unaligned nations to acquire Bitcoin, driven by sovereign wealth strategies. Japan’s Prime Minister expressed hesitance about Bitcoin reserve adoption, while experts suggest smaller countries may lead in accumulating reserves, with broader changes unfolding gradually.
Adoption News
Russia is leveraging Bitcoin and digital assets to bypass Western sanctions and bolster international trade. Finance Minister Anton Siluanov confirmed ongoing Bitcoin transactions and expressed confidence in expanding their use in 2025. Recent laws legalized Bitcoin mining and trade while introducing tax exemptions to boost financial stability.
Russia, the second-largest Bitcoin miner globally, produced 54,000 BTC in 2023, generating $550 million in tax revenue. Despite energy-based mining restrictions, the government views Bitcoin as critical to reshaping global trade and reducing reliance on the US dollar. President Putin advocates for Bitcoin’s decentralized nature and suggests a national Bitcoin reserve.
Bitwise Asset Management has filed with the U.S. Securities and Exchange Commission for the "Bitwise Bitcoin Standard ETF." This ETF targets companies that hold at least 1,000 Bitcoins in their corporate treasuries, reflecting the rising trend of businesses adopting the "Bitcoin standard." The fund aims to track firms leveraging Bitcoin as a strategic asset.
While this move aligns with corporate Bitcoin adoption, it comes with the inherent risks and regulatory scrutiny associated with cryptocurrency investments. This filing highlights the growing institutional interest in Bitcoin as part of corporate financial strategies.
Matador Technologies, a Canadian blockchain company, has added Bitcoin to its corporate treasury with a $4.5 million purchase. The decision is driven by the desire to shield against potential depreciation of the Canadian dollar, given the nation's economic risks.
The company views Bitcoin as a hedge and store of value, citing its liquidity, security, and institutional adoption. Matador is also integrating Bitcoin into a digital gold platform launching in early 2025, combining physical gold with blockchain technology. This move aligns with the growing trend of corporations incorporating Bitcoin into their financial strategies, like MicroStrategy and Tesla.
Strive, led by Vivek Ramaswamy, has submitted a filing to U.S. regulators to launch an actively managed ETF focused on convertible bonds issued by MicroStrategy and other companies with significant Bitcoin investments. The fund aims to offer exposure to "Bitcoin Bonds," which are securities linked to Bitcoin purchases, either directly or through derivatives like swaps and options.
Strive’s ETF intends to capitalize on the growing trend of corporate Bitcoin treasuries. Although management fees are unspecified, the fund will likely charge higher fees due to its active management approach. MicroStrategy’s $27 billion Bitcoin investment strategy is a key component.
The IRS has confirmed that cryptocurrency staking rewards are taxable income upon receipt, according to Revenue Ruling 2023-14. This decision has led to legal challenges, notably from crypto investor Joshua Jarrett, who is suing over the timing of the tax, questioning whether rewards should be taxed immediately or when the staked assets are sold or converted into fiat currency.
This ruling adds to the growing debate on how cryptocurrencies should be taxed, particularly regarding staking rewards, which could influence future tax policies in the cryptocurrency space and impact investor behavior.
Mining News
Russia has enacted a six-year ban on crypto mining in 10 regions, including Dagestan, North Ossetia, and Chechnya, citing concerns over high energy consumption. Effective January 1, 2025, the ban will last until March 15, 2031, and extends to mining pool participation.
Temporary restrictions may apply in other regions during peak energy demand. While crypto mining was legalized in July, Russia prohibits its use for domestic payments, allowing cross-border transactions to counteract sanctions. The regions impacted may change based on energy demand evaluations, with inter-regional electricity subsidies also influencing mining viability.
Kyrgyzstan's cryptocurrency mining tax revenue dropped over 50% year-on-year to 46.6 million soms ($535,000) in 2024, compared to 93.7 million soms ($1 million) in 2023, despite rising crypto valuations. The country, known for its untapped renewable energy, imposes a 10% tax on electricity used by miners.
While only 10% of Kyrgyzstan's hydropower potential has been developed, surplus energy from renewable sources globally is being used innovatively. For example, Deutsche Telekom harnesses surplus renewable energy for Bitcoin mining in Germany, stabilizing grids and converting unused electricity into economic value, demonstrating the broader potential of cryptocurrency mining infrastructure.
