U.S. Treasury Bombshell and 'Trumpflation' Concerns Combine... "Bitcoin Could Drop Up to 25% More" [Kang Min-seung's Trade Now]

"Bitcoin Must Stably Break 97.5k to Recover"

"Drop Expected to Widen if Below 92.5k"

Image = Shutterstock

Due to the impact of strong U.S. employment indicators and a surge in Treasury yields, Bitcoin (BTC), which had plunged after giving back the '100,000 dollars', is continuing its downward trend as downward pressure intensifies.

Market experts have analyzed that Bitcoin could continue its recovery if it stably breaks through $97,500, but if it falls below the $92,500 level, the drop could widen.

On the 10th, as of 9:20 a.m., Bitcoin is trading at $92,588 on the Binance USDT market, down 2.5% from the previous day (140,214,000 KRW on the Upbit KRW market). At the same time, the Kimchi Premium (the price difference between overseas and domestic exchanges) has recently risen slightly to 3.29%.

"Uncertainty of Trump-induced Inflation Grows... Short-term U.S. Treasury Bombshell"

Jerome Powell, Fed Chair, speaks at a press conference after the FOMC last December. / Image = Fed website

Recently, global stock and cryptocurrency markets have fallen due to strong U.S. employment indicators and a surge in Treasury yields. Along with this, it is reported that the U.S. Federal Reserve (Fed) expressed concerns about the inflation risks that President-elect Donald Trump might bring during the Federal Open Market Committee (FOMC) meeting last December.

According to the minutes of last month's FOMC released by the Fed on the 8th (local time), almost all Fed members judged that "the upside risks of inflation have increased." The minutes did not directly mention Trump's name but mentioned at least four times that changes in Trump's immigration and trade policies could shock the U.S. economy. Bank of America (BoA) analyzed that "if Trump's large-scale tariffs are announced, the Fed may stop cutting rates."

The U.S. job and service industry indicators announced the previous day also exceeded market expectations, increasing inflation concerns, which acted as a burden on the stock market. The U.S. Department of Labor's Job Openings and Labor Turnover Survey (JOLTs) announced on the 7th (local time) recorded about 8.1 million, exceeding market expectations and reaching a six-month high. With the U.S. employment indicators showing a solid appearance, attention is focused on the U.S. non-farm employment indicators to be announced at 10:30 p.m. today (Korean time).

In particular, there are concerns that the possibility of Treasury yields rising (Treasury prices falling) is increasing as the maturity of short-term bonds, which affect policy rates, is due to arrive significantly in the first quarter. The U.S. government has been intensively issuing short-term Treasuries in recent years to cover fiscal deficits. Typically, rising market interest rates result in funds flowing out of risky assets such as cryptocurrencies and stocks.

Image = CME FedWatch Capture

The interest rate futures market is raising the possibility of a rate freeze in January. According to the CME FedWatch at 9 a.m. that day, the possibility of the Fed freezing the base rate by 0.25 percentage points this month is 93.1%. The possibility of freezing the base rate in March has also risen to 59%.

Cryptocurrency Market, Trading Volume and Liquidity Steadily Recovering... "Mid-term Upward Expectations"

Bitcoin spot ETF funds listed in the U.S. / Image = Passide Investment

Bitcoin spot exchange-traded funds (ETFs) saw a net inflow of $1.128 billion (about 1.6518 trillion KRW) over the past week (from the 2nd to the 8th). ETF fund inflows showed a decline after the 7th and turned into a net outflow the previous day.

Recent news that Switzerland is pushing for a legal amendment to mandate the central bank's Bitcoin reserves, and that X (formerly Twitter)'s own payment system 'X Money' may support cryptocurrency payments and be launched early, have raised expectations. On the other hand, the U.S. Department of Justice's approval to sell more than 69,000 Bitcoins (about 9.516 trillion KRW) seized from the dark web 'Silk Road' has triggered fear.

Bitcoin may show weakness according to macroeconomic trends, but it is analyzed that it is in a good position to rise in the mid-term. Global cryptocurrency exchange Bitfinex stated in a weekly report, "The U.S. economy showed resilience last year, but uncertainty remains in some sectors such as the solid labor market," adding, "The first quarter of this year may see a significant drop in Bitcoin, but it is in a good position to rise further in the mid-term."

Bitcoin's 'Liquidity Inventory Ratio' is showing a downward trend. / Image = Bitfinex Report

The report continued, "The supply of Bitcoin (including mining) is generally decreasing. The liquidity of Bitcoin accessible in the market is rapidly decreasing." According to the report, the 'Liquidity Inventory Ratio', which indicates the period during which the supply of Bitcoin can meet market demand, has plummeted from 41 months in October last year to 6.6 months recently. This suggests that the decline in supply is steepening compared to the market demand for Bitcoin.

Bitcoin's liquidity has recovered to pre-FTX collapse levels. / Image = Kaiko

As market liquidity recovers, expectations for a rebound this year are rising. Cryptocurrency data analysis company Kaiko stated in a research report, "Since the launch of Bitcoin spot ETFs in the U.S. last year, the liquidity of the cryptocurrency market has recovered to pre-FTX collapse levels by filling the Alameda gap," adding, "The trading volume aggregated from 30 global exchanges has also reached its highest level since 2021."

Kaiko added, "This year, U.S. cryptocurrency regulations are expected to establish clarity," adding, "The recent rally has been driven by strong interest and record-breaking buying from companies like MicroStrategy. Institutional investors' interest is expected to expand beyond Bitcoin to Ethereum and other altcoins this year." In fact, companies like KULR, Rumble, and Genius Group added Bitcoin to their balance sheets in the fourth quarter.

What Are the Catalysts for Bitcoin's Rise This Year?... "Focus on 7 Factors Including Strategic Bitcoin Reserves"

Donald Trump, U.S. President-elect. / Image = Shutterstock

Meanwhile, optimism is spreading that the U.S. under the second Trump administration will pursue pro-cryptocurrency policies. Previously, President-elect Trump has called himself the 'crypto president' and has publicly announced a strategic Bitcoin reserve plan. According to Reuters, President-elect Trump is expected to announce 25 executive orders, including cryptocurrency policies, on his first day in office (the 20th).

On the 5th, the cryptocurrency specialist newsletter GoAsymmetric cited major policy factors driving Bitcoin's rise this year as △ U.S. strategic Bitcoin reserve plan △ Bitcoin reserves in other countries worldwide △ Abolition of cryptocurrency custody accounting guidelines SAB-121 △ Establishment of clear cryptocurrency regulations and roles of the SEC and CFTC △ Stablecoin legislation △ Allowance of cryptocurrency prime brokerage and trading services by U.S. banks △ China's liquidity supply.

First, SAB-121 is an accounting management guideline proposed by the U.S. SEC, which has been criticized for potentially placing barriers to banks entering the cryptocurrency market. According to the guideline, if a financial company entrusts a customer's cryptocurrency to a custodian, it must record it as a liability on the balance sheet. Prime brokerage refers to comprehensive financial services provided to institutional investors. If prime brokerage services appear in the cryptocurrency market, institutional investors' participation in the cryptocurrency market is expected to become full-fledged.

In particular, there is a forecast that Bitcoin will rise significantly if China injects large-scale liquidity to boost its economy. With the recent weakness of the yuan becoming prominent and funds leaving the Chinese stock market, there is also a forecast that Bitcoin will be noted as an alternative asset. In fact, after China devalued the yuan in 2015, Bitcoin surged more than threefold.

"Bitcoin Facing Increased Downward Pressure, Could Drop Up to 25% More"

Market experts have analyzed that Bitcoin is likely to continue its recovery if it stably breaks through $97,500, but if it falls below the $92,500 level, the drop could widen. On-chain analysts have analyzed that 'whales' holding more than 1,000 Bitcoins have been accumulating Bitcoin in large quantities during the recent downturn.

Recently, there has been an analysis that the possibility of further decline is increasing as downward pressure on Bitcoin intensifies. Ayush Jindal, a NewsBTC researcher, diagnosed, "Bitcoin is under downward pressure as the downtrend takes the lead," adding, "Bitcoin is consolidating losses after recording a low near $92,500." The short-term support levels for further decline are estimated to be $92,500-$92,000 and $91,500.

On the other hand, he added, "If Bitcoin continues to trade above $92,500, further upward movement can be targeted," adding, "Resistance to the rise is sequentially located at $95,000-$96,500, $97,500, and $98,800."

There is also an analysis that Bitcoin's weakness is likely to continue for a while due to the selling pressure from short-term investors. Rakesh Upadhyay, a Cointelegraph researcher, analyzed, "Bitcoin recently failed to maintain $100,000 and fell," adding, "This may be due to short-term investors realizing profits. There are no signs yet of Bitcoin forming a short-term bottom."

Upadhyay predicted, "Bitcoin's bullish momentum is weakening, but $90,000 is likely to be a solid support level," adding, "If Bitcoin breaks below the $90,000-$85,000 range, it is likely to turn into a downtrend." He added that if Bitcoin stably breaks through $97,679, it could continue to rise to $102,725 and $108,353.

There is also an analysis that the possibility of a short-term decline has increased after Bitcoin recently entered the overbought territory. Katie Stockton, founder of Fairlead Strategies, analyzed, "Bitcoin recently showed overbought signals in the surge that broke through $100,000, and a double-digit decline is expected. The cryptocurrency market is expected to deepen its short-term weakness."

The analyst predicted, "Bitcoin is expected to form a support level near $84,500," adding, "If the selling pressure is steeper than expected, it could fall about 25% more from the current price to $73,800." He also predicted, "Technically, Bitcoin is expected to continue its downtrend due to overbought conditions based on weekly and daily charts. Further upward movement is likely to be limited in the short term." However, the analyst added that Bitcoin is expected to continue its bullish trend in the long term.

Kang Min-seung, Bloomingbit Reporter minriver@bloomingbit.io