The crypto market downturn on Monday 27th, January 2025, with a 6.5% decline bringing its total valuation to $3.38 trillion. In contrast, the Nasdaq 100 saw a 2.5% decrease. This sharp drop in crypto valuations is attributed to the emergence of the startup DeepSleek and its free AI offerings, along with investor apprehensions ahead of the Federal Reserve’s upcoming meeting and profit-taking following recent crypto-related directives from President Trump.
Thank you for reading this post, don't forget to subscribe!Crypto Market downturn with Bitcoin Below $98,000
Bitcoin, the flagship cryptocurrency, fell by 6.5%, dipping below the $98,000 mark during early European trading sessions. The price is currently testing its 50-day moving average after maintaining a position above this level for the past ten days. Should the decline persist without a swift recovery, the next critical support level is anticipated around $93,000, aligning with the lower boundary of the nine-week trading range and representing 61.8% of the rally observed since early November.
Ethereum Tests Crucial Support Levels
Ethereum, the second-largest cryptocurrency by market capitalization, was not spared from the market-wide sell-off. Its price retreated to $3,000, a level that has served as a support floor since November. During Monday’s trading, Ethereum briefly touched its 200-day moving average. A sustained decline below this threshold could signal a bearish trend reversal, warranting close monitoring by investors.
Market Sentiment Reflects Heightened Fear
Recent analyses indicate a surge in fear-related keywords within crypto-focused social media discussions. Terms such as “ledger,” “firmware,” “hardware,” “wallet,” “secure,” “seed,” and “key” have dominated conversations, reflecting growing security concerns among traders. Historically, an increase in such terminology has been observed during periods of heightened market anxiety, as noted in previous downturns like the post-FTX collapse.
Institutional Inflows and Regulatory Developments
Despite prevailing market volatility, institutional interest in cryptocurrency investment products remains evident. Data from SoSoValue reveals that inflows into spot Bitcoin ETFs in the U.S. totaled $1.76 billion last week, slightly down from $1.96 billion the previous week, bringing cumulative inflows to $39.94 billion. Similarly, spot Ethereum ETFs saw inflows of $139.3 million, contributing to a total of $2.80 billion since their launch in July.
In regulatory news, the U.S. Securities and Exchange Commission (SEC) has rescinded the SAB 121 rule, which had effectively prohibited banks from holding cryptocurrencies. This move, initiated by Commissioner Hester Peirce, marks a significant shift in the regulatory landscape, potentially facilitating greater institutional participation in the crypto market.
Strategic Cryptocurrency Reserves and Market Outlook
Discussions are underway regarding the establishment of a strategic cryptocurrency reserve in the United States. However, industry experts, such as Pierre Rochard, Vice President of Research at Riot Platforms, identify potential obstacles, including the role of fintech companies like Ripple, which are promoting Central Bank Digital Currencies (CBDCs) designed to operate on their proprietary infrastructures.
As the market navigates these developments, investors are advised to exercise caution, stay informed about regulatory changes, and monitor key support levels for major cryptocurrencies. The interplay between technological advancements, regulatory shifts, and market sentiment will continue to shape the crypto landscape in the coming weeks
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