Bitcoin’s meteoric rise toward the $100,000 mark has encountered a temporary setback, with the cryptocurrency experiencing a sharp pullback that has left traders on edge. After reaching a record high just under $100,000, Bitcoin’s sudden decline has raised several questions, with Standard Chartered analyst Geoffrey Kendrick offering insightful explanations for the market correction.
Why Bitcoin is Pulling Back: Key Factors at Play
One major factor contributing to Bitcoin’s recent dip is the reduction in the U.S. Treasury term premium. This decline follows the announcement of President-elect Donald Trump’s Treasury Secretary, which has sent ripples through the financial landscape, including the crypto market. Kendrick highlights that Bitcoin, often seen as a hedge against financial instability, loses some of its appeal when the Treasury premium drops. He explains, “Bitcoin thrives on uncertainty in traditional finance. When Treasury term premiums drop, that hedge utility temporarily diminishes.”
Supporting this view, data from the New York Fed shows a clear connection between recent movements in the U.S. Treasury market and Bitcoin’s price action. As the term premium falls, Bitcoin’s role as a hedge weakens, contributing to the current correction.
The Impact of Bitcoin Options Expiration
Adding pressure to Bitcoin’s price are the substantial monthly Bitcoin options expirations scheduled for Friday. Deribit data reveals over 18,000 BTC in open interest, with strike prices ranging from $85,000 to $100,000. Historically, these options expirations exert significant influence on price movements, as traders adjust their positions around key strike prices. This creates a “magnet effect” on spot Bitcoin prices, potentially amplifying the pullback.
Kendrick’s Price Prediction: Could Bitcoin Fall Below $88,700?
Kendrick forecasts a potential drop below $88,700, which represents the average purchase price for institutional players like ETFs and MicroStrategy since the U.S. elections. This could lead Bitcoin to test a critical support zone between $85,000 and $88,700 before continuing its upward momentum. Despite the short-term pullback, institutional interest in Bitcoin remains strong, with significant inflows into Bitcoin ETFs and additional purchases by MicroStrategy.
However, Kendrick also notes that the recent institutional buying pressure around $88,700 could act as a temporary ceiling for Bitcoin’s price until broader market conditions shift.
Broader Crypto Market Impact: Volatility and Liquidations
The pullback in Bitcoin has also affected the broader cryptocurrency market. Bitcoin’s price drop from $98,500 to $93,500 has mirrored a decline in overall market capitalization, falling from $3.5 billion to $3.35 billion. This volatility has triggered over $500 million in futures liquidations, signaling increased risk aversion among traders.
Kendrick’s Long-Term Outlook: Bitcoin Still on Track for $125,000
Despite the correction, Kendrick remains optimistic about Bitcoin’s long-term prospects. He maintains his year-end price target of $125,000 for Bitcoin and projects a 2025 target of $200,000. He views the current pullback as a necessary market correction influenced by macroeconomic factors and technical events. “We are still in a structural bull market,” Kendrick asserts, emphasizing that Bitcoin is well-positioned to resume its upward trajectory once the short-term challenges pass.
Bitcoin’s Current Status: Market Activity and Price Movements
As of today, Bitcoin is trading at approximately $93,440, down 1.5% from its peak of $99,645 on November 22nd. The current pullback adds another layer of complexity to the cryptocurrency’s ongoing journey, keeping investors and traders on alert.
Bitcoin’s future remains a topic of intense interest and debate, with this latest retracement raising new questions about its short-term price action while maintaining strong bullish sentiment for the long term.