Bitcoin declines for second day

Bitcoin declines for second day awaiting new regulatory reality for crypto in the US

Written by Samer Hasn, Senior Market Analyst at XS.com

Bitcoin continues to decline for the second day in a row by more than 1% and is heading below $103,000. This decline keeps the crypto market under pressure as both Solana and XRP are down more than 2%.

The lackluster performance of cryptocurrencies comes as the market is waiting to see what the regulatory environment in the United States will be like after Donald Trump returns to the presidency.

Trump has previously pledged to make the United States the capital of cryptocurrencies and promised to create a strategic reserve of Bitcoin. His and his family’s direct involvement in this sector suggests to markets that he may be committed to implementing his promises, and this has already been priced in.

While the market is still uncertain about the extent of adoption of cryptocurrencies under the new Republican administration. Goldman Sachs CEO David Solomon said that regulatory hurdles are preventing banks from directly dealing with bitcoin, despite ongoing research into the potential of the technology in the financial system. 

The coming days and weeks may tell us what the regulatory landscape will be and whether it will be truly friendly to crypto adoption as new administrations and regulators are finalized and favorable bills are introduced. 

In any case, despite recent declines, we are still seeing signs that bitcoin’s bull run could resume. Since January 15, spot bitcoin exchange-traded funds have attracted more than $3.4 billion, according to SoSo Value. This also coincides with the stock market’s momentum, in light of strong corporate earnings results and optimism about regulatory and tax easing, which is supporting riskier assets like crypto. The Nasdaq 100 rose to its highest level this year and is closer to its all-time high from December.

In contrast, the futures market is showing a different picture this week. With Bitcoin open interest growing to over $66 billion from under $60 billion about a week ago, we are now witnessing a growing dominance of sellers, with the long/short ratio reaching 0.89, the lowest since the beginning of the year, according to CoinGlass figures.

In addition, Bitcoin flows to cryptocurrency exchanges on Monday and Tuesday increased to more than 30,000 Bitcoins each day, according to figures provided by IntoTheBlock, which may be a sign of a potential intention from investors to sell or take profits.

Therefore, the current reality is anticipation of further positive regulatory developments, in addition to the presence of fundamentals supporting price growth, but in the face of pressure from the futures market and the tendency towards taking profits, which may push towards further correction in the coming hours and days.

Zaid Barem / YMM