Original | Odaily Planet Daily (@OdailyChina)

Author | Fu Ruo (@vincent31515173)

In the past week, the cryptocurrency market has continued to decline. Yesterday, after the news that the U.S. Department of Justice was authorized to sell $6.5 billion worth of Bitcoin seized from the dark web Silk Road, Bitcoin dropped from $94,000 to below $92,000, intensifying market panic. Several officials from the Federal Reserve also indicated that they would adjust interest rate policies, suggesting a slowdown in rate cuts in 2025 and the implementation of tightening policies. Additionally, due to the impact of wildfires in Los Angeles, some analysts pointed out that many wealthy individuals are selling off crypto assets to rebuild their lives after the disaster. The various performances in the market have made investors worried about the future of cryptocurrency.

Today, Russia also began selling 1,032 Bitcoins seized in the Infraud hacker organization case. Under the influence of multiple factors, the cryptocurrency market has once again declined today.

• According to real-time data from OKX, as of the time of writing, BTC has fallen below $92,000, currently reported at $93,760, with a 24-hour decline of 0.45%;

• Besides BTC, altcoins led by ETH are also facing significant declines, with ETH dropping below $3,200, currently reported at $3,258, with a 24-hour decline of 1.94%; SOL has fallen below $190, currently reported at $189.57, with a 24-hour decline of 1.4%;

• On-chain data is also not escaping this downturn, with the previously booming AI Agent sector experiencing a collective major correction. According to GMGN data, AI Agent tokens are experiencing widespread declines, including: ai16z with a 24-hour decline of 23.05%, currently valued at $1.68 billion; FARTCOIN with a 24-hour decline of 31.09%, currently valued at $919 million; ZEREBRO with a 24-hour decline of 41.92%, currently valued at $329 million.

Due to the overall market downturn, the total market capitalization of cryptocurrencies has also rapidly decreased. CoinGecko data shows that the current total market capitalization of cryptocurrencies has dropped to $3.4 trillion, down 3.4% in 24 hours. The trading enthusiasm among crypto users has also declined, with today's Fear and Greed Index from Alternative reporting a score of 50, shifting from greed to neutral.

In terms of derivatives trading, Coinglass data shows that in the past 24 hours, the total liquidation across the network reached $375 million, with long positions liquidating $260 million and short positions liquidating $115 million. In terms of cryptocurrencies, BTC saw liquidations of $99.74 million, while ETH saw liquidations of $69.68 million.

Below, Odaily Planet Daily analyzes the reasons for the recent market decline and future trends.

Multiple Factors Leading to Market Decline

The disaster recovery from the Los Angeles wildfires has made cryptocurrency the fastest way to cash out

Recently, the devastation caused by the wildfires in Los Angeles has not only resulted in significant property losses for local residents but has also had a notable impact on the cryptocurrency market. According to data from Coinbase, after the outbreak of the wildfires, Bitcoin trading volume from Los Angeles and surrounding areas surged, especially large transactions, reflecting that some affected families are eager to cash out crypto assets to meet the funding needs for disaster recovery.

According to local real estate market analysts, many wealthy families hold cryptocurrencies like Bitcoin and Ethereum, typically viewing them as an important part of their investment portfolios. However, due to the destruction caused by the wildfires, they have had to quickly liquidate these assets.

The head of a blockchain research institution in Los Angeles also pointed out that the recent price fluctuations in the market may be related to this large-scale asset sell-off. Especially in the context where individuals in the tech circle and high-net-worth individuals generally hold a high proportion of crypto assets, the short-term surge in funding needs after the disaster has intensified selling pressure in the market. Additionally, analysts warn that short-term selling behavior may negatively impact the stability of the cryptocurrency market.

U.S. Department of Justice authorized to sell $6.5 billion worth of Silk Road Bitcoin

The U.S. Department of Justice has been authorized to handle 69,370 Bitcoins related to the infamous "Silk Road" case, currently valued at approximately $6.5 billion. This news has triggered market volatility, with some investors concerned that the sale of these Bitcoins may conflict with Trump's proposed "establishing a Bitcoin reserve" plan. However, Trader T stated on the X platform: “From ‘authorized’ to ‘actual sale’ may take several months, and the court has already established a liquidation plan for 30,000 BTC in 2023.”

Meanwhile, BitMEX co-founder Arthur Hayes stated on the X platform that “diamond hands” in the market are ready to buy the dip at this time. CryptoQuant CEO Ki Young Ju also pointed out that approximately $379 billion entered the market last year, equivalent to about $10 billion per day, so the $6.5 billion worth of Bitcoin sold by the U.S. government could be absorbed by the market in just a week, and investors need not worry excessively. El Salvador's President Nayib Bukele humorously remarked that perhaps we all have a chance to buy Bitcoin at a discount.

Coindesk analyst James Van Straten believes that concerns about the sell-off may be exaggerated. If these 69,370 Bitcoins are indeed sold, they may be sold in an orderly manner to obtain the best price possible. Moreover, the market has already anticipated this situation, so it may have already digested this potential risk.

Federal Reserve's rate cut pace slows in 2025

Recently, the Federal Reserve's monetary policy has changed, mainly reflected in the slowdown of rate cuts. Boston Fed President Collins stated that considering the current strong employment data and persistent inflationary pressures, she believes that the magnitude of rate cuts in 2025 will be less than previously expected by the market. Specifically, Collins supports the Federal Reserve cutting rates twice in 2025, rather than the previously expected four times, reflecting the Fed's cautious attitude towards the economic situation.

The Federal Reserve is currently facing challenges of strong economic growth and inflation above 2%. Kansas City Fed President George noted that the current economic conditions are close to achieving the dual goals of price stability and full employment, and he believes that policy should remain neutral, with interest rates close to long-term levels. George emphasized that further adjustments to monetary policy would only occur if there are significant changes in data.

Additionally, Fed Governor Bowman mentioned in a recent speech that she supports last month's rate cut decision and believes it is the "final step" in the Fed's monetary policy adjustment. She pointed out that inflation risks still exist, so future monetary policy decisions will remain cautious.

The challenge facing the Federal Reserve is that, although the current economic performance is strong, stabilizing the inflation rate at the target level of 2% remains difficult. George expects that the Fed may not achieve this goal until 2026.

From the market's expectations, according to CME's "FedWatch" data, investors generally believe that the probability of the Fed maintaining the current interest rate in January 2025 is 93.1%. In the coming months, although the probability of rate cuts has increased, the market's expectations for the Fed's policy remain relatively cautious.

Overall, the Federal Reserve's monetary policy has undergone adjustments, with a slowdown in the pace of rate cuts, reflecting the Fed's cautious assessment of the current economic situation. Although future rate cuts may continue, the market expects this process to be slower and more cautious.

In 10 days, the cryptocurrency market trend may become clear

In the next 10 days, the cryptocurrency market may face a critical turning point. Although recent market sentiment remains low and investor confidence appears somewhat fatigued, multiple signs indicate that the cryptocurrency market may see a warming trend in 2025. According to Reuters, industry insiders have revealed that the cryptocurrency industry is actively lobbying the U.S. government, requesting that the Trump administration issue an executive order within the first 100 days of taking office to establish a U.S. Bitcoin reserve. This initiative aims to ensure that the crypto industry can access banking services and plans to set up a dedicated cryptocurrency advisory committee. Insiders expect that this order may be issued as early as January 20, 2025. This action could provide new policy support for the cryptocurrency industry and serve as a catalyst for market recovery.

On the other hand, the fundamentals of the cryptocurrency market remain strong. Data from IntoTheBlock shows that despite the overall market downturn, the net outflow trend from centralized exchanges (CEX) continues. The data indicates that more and more investors are choosing to hold assets long-term rather than panic sell due to short-term price fluctuations. This phenomenon suggests that there is still strong confidence in the market, and investors remain optimistic about the future growth potential of crypto assets. These behaviors reflect a positive attitude among investors towards the long-term development of cryptocurrencies, hoping that the market can recover after a short-term adjustment.

Furthermore, the regulatory environment for altcoins is expected to improve in 2025. Andrew Baehr, Managing Director of CoinDesk, pointed out that altcoins will benefit from changes in the cryptocurrency regulatory environment in 2025, especially as the SEC may ease regulatory pressure on altcoins, providing a more favorable policy environment for the launch of more crypto projects. The improvement in regulation will help attract more projects to enter the market and may further promote the healthy development of the market.

Finally, the trend of integration between AI and cryptocurrencies will become increasingly evident. With the participation of Web2 giants, the underlying technology of AI in the crypto field will be further strengthened. Members from leading industry companies like Coinbase, Google, and a16z have jointly launched the "Aiccelerate" project, a decentralized autonomous organization (DAO) aimed at accelerating the deep integration of cryptocurrency and artificial intelligence technology. AI technology is expected to play an increasingly important role in blockchain project development, transaction execution, risk management, and more, bringing more innovation and transformation to the crypto industry.

In summary, although the current market environment is challenging, with the gradual implementation of policy support, the recovery of investor confidence, and the promotion of AI technology, the cryptocurrency market in 2025 is expected to gradually recover and may welcome a new peak of development.

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