Bitcoin has Dropped by $5,000 in 24 hours, Dragging Altcoins Down With it. What Will be the Next Step?

Investors worry that inflation and lending rates remain high.

Bitcoin (BTC) fell sharply on 7 January, losing more than 5 per cent and dropping below $100,000 after the release of macroeconomic data in the US, following the stock markets' trend. Analysts at Presto Research, as reported by The Block, linked this fall to investor concerns about inflation and lending rates in the US, which remain high.

Ethereum (ETH), the second-largest cryptocurrency by market capitalisation, is down more than 8 per cent, trading at $3.33k according to Coinmarketcap.

With the exception of a few cryptocurrencies from the list of the 100 largest by market capitalisation, crypto assets have fallen even further than Bitcoin. The leaders in the decline over the past 24 hours have been the tokens of Hyperliquid (HYPE), Gala (GALA) and Celestia (TIA), all dropping about 16%.

The rapid decline in cryptocurrencies has led to the liquidation of 233,000 trading positions worth nearly $700 million in the past 24 hours, according to the Coinglass service. Of these, more than $270 million involved Ethereum and Bitcoin, about $60 million Solana (SOL) and Dogecoin (DOGE).

"Not only cryptocurrencies, but also the NASDAQ and the S&P 500 fell more than 1 per cent yesterday due to concerns over inflation," said Min Jun, an analyst at Presto Research.

Rachel Lucas, cryptocurrency analyst at BTC Markets, noted that economic data in the US has prompted traders to believe that the Federal Reserve (Fed) will keep interest rates high for a longer period.

Bob Walden, head of trading at digital asset firm Abra, also pointed to rising yields in the US Treasury market, which is contributing to growing caution against Bitcoin, as reported by Bloomberg.

"The market was already concerned about comments by Federal Reserve Chairman Jerome Powell in December that indicated a firm stance on monetary policy and dampened hopes of further rate cuts," Lucas added."

Other statistics

Since the price peak on 18 December (over $108k), BTC's quotations have fallen more than 11% to $95.7k, according to Coinmarketcap. The total market capitalisation of cryptocurrencies saw a comparable drop, of around 12%, to $3.35 trillion.

The start of the downward movement coincided with the previous FOMC meeting on 18 December and Fed Chairman Jerome Powell's comments that the fight against inflation is still on, as well as the fact that Powell did not publicly support the idea of creating a national reserve based on the main cryptocurrency.

As noted by experts interviewed by Bloomberg, Bitcoin's prospects in 2025 will depend in part on the extent to which Trump delivers on his promises regarding cryptocurrencies, including the creation of a national Bitcoin reserve.

"If Trump doesn't quickly deliver on all of these promises, the euphoria could turn to disappointment, leading to volatility in the cryptocurrency market," wrote Tim Krawczunowski, head of telecom crypto project Chirp, for Time magazine."