Christmas Day brought a special surprise for cryptocurrency holders as Bitcoin briefly surpassed the $99,000 mark. However, this joy was short-lived as the surge quickly dissipated, with the original cryptocurrency slipping below $94,000 by the end of the week—a significant drop of over 14% from its record high of $108,000 achieved on December 17. This development prompts speculation on whether this downward trend is merely a temporary pause or a more prolonged retreat following the exuberant peaks that coincided with the initial excitement surrounding a new, crypto-friendly sentiment in Washington, D.C.
The trajectory of Bitcoin has been characterized by tumultuous upswings followed by sharp declines and extended periods of stagnation. While these downturns are less severe compared to the early days of the digital currency, such as the tumultuous ride in 2013 when Bitcoin skyrocketed from about $13 to an astonishing $1,100, only to plummet to around $300 a year later, similar patterns have emerged in subsequent boom cycles.
The crypto frenzy of 2017 and 2021 witnessed Bitcoin hitting highs of approximately $20,000 and $69,000 respectively, only to subsequently plummet by over 80%. Notably, the recent bull market has displayed certain unique features that set it apart from prior cycles. Primarily, the rally unfolded in two distinct phases. The initial surge occurred earlier this year when a flurry of approvals for new Bitcoin exchange-traded funds (ETFs) propelled the currency to a then record high of $74,000 before retreating.
The second surge in the crypto market followed the November elections which saw the electoral victory of Donald Trump, a recent proponent of cryptocurrencies, alongside pro-crypto Republicans in both chambers of Congress. This political shift has reshaped the broader narrative surrounding cryptocurrency as the U.S. government is anticipated to embrace the industry after years of attempting to suppress it.
Aside from the tailwinds of ETF approval and political support, Bitcoin and the wider crypto sector have benefitted from increasing interest from major corporations and even sovereign nations. This underscores a more extensive and deeper backing for Bitcoin compared to previous periods, hinting at a decreased likelihood of a drastic crash of 80% or more, reminiscent of past cycles.
Despite these positive developments, the latest rally has failed to deliver the anticipated “killer application” capable of mainstreaming cryptocurrencies into everyday consumer life. Instead, it has spurred a familiar wave of hype and speculative ventures as questionable projects attempt to capitalize on the fervor.
Seasoned cryptocurrency enthusiasts argue that a viable use case has emerged in stablecoins and Bitcoin itself, which has solidified its position as “digital gold”—a scarce and secure store of value universally recognized. Furthermore, the notion that Bitcoin serves as a hedge against macroeconomic uncertainties has been challenged in recent weeks, with crypto prices continuing to be influenced by factors like stock market fluctuations and central bank policy decisions.
