You are probably familiar with the Bitcoin “Christmas rally.” It’s a time near the end of the year when Bitcoin often sees a noticeable price increase. On average, Bitcoin gains around 2.8% during the 51st week of the year. However, this year, instead of rising, Bitcoin has dropped by more than 10% to under $92,000. Bitcoin has recovered and is currently trading at $97,500 according to CoinMarketCap data.
What’s Behind Bitcoin Drop Right Now?
The Federal Reserve (the Fed), which plays a big role in managing the U.S. economy, recently shared its plans for interest rates. While it slightly lowered rates to 4.25-4.5%, comments from Fed Chair Jerome Powell about ongoing inflation created uncertainty. When investors hear things like “high inflation might stick around,” they often become cautious.
This uncertainty led to a wave of Bitcoin selling, with over $800 million in liquidations (when investors are forced to sell their positions) happening within just 24 hours. That’s a lot of movement in a short time, and it can make prices fall quickly.
Open Interest and Fear in the Market
Another factor to consider is Bitcoin’s Open Interest (OI). This metric shows the total value of Bitcoin futures contracts (bets on Bitcoin’s future price). After the Fed’s announcements, Bitcoin’s OI dropped by $3 billion as per CryptoQuant, falling from $33 billion to $30 billion.
Such a big drop suggests that many investors decided to back out of their bets. At the same time, the VIX, also called the “Fear Index,” jumped. The VIX measures market uncertainty, and when it rises, it often signals that people are worried about riskier investments like Bitcoin.
What Should New Bitcoin Investors Know?
While this all might sound a bit overwhelming, the current drop doesn’t mean Bitcoin is “broken” or that it won’t recover. Price dips like this have happened before and often create opportunities for those looking to invest for the long term.
Historically, when Bitcoin’s price temporarily dips, some investors see it as a chance to buy at a lower price. If you’re considering investing, remember that Bitcoin can be very volatile. It’s wise to only invest what you can afford to lose and to think long term instead of chasing quick profits.
What’s Coming Next for Bitcoin?
The Fed has shared that it might not lower interest rates as much as previously thought in 2025. Higher interest rates can make riskier assets like Bitcoin less attractive to some investors. This could mean that volatility in Bitcoin might stick around for a while.
For now, if you’re keeping an eye on the market, it might be worth watching how things develop over the next few days or weeks. And if you’re planning to make a move, make sure you do your homework and understand how Bitcoin fits into your overall financial goals.
The year-end dip doesn’t mean Bitcoin’s long-term story has changed. It’s just another chapter in its journey as a global asset that continues to intrigue and challenge investors.
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