Here’s why Bitcoin and most altcoins are experiencing a decline

Bitcoin and many altcoins have experienced significant declines this week, even after the inauguration of Donald Trump, who was anticipated to be a crypto-friendly president in the United States. Despite this, Bitcoin’s price fell to $101,000 on January 23rd, and popular meme coins such as ai16z, Fartcoin, and Official Trump saw drops of over 20%. Other notable altcoins like Lido DAO, Jupiter, Virtuals Protocol, and Hyperliquid also faced heavy losses.

There are several potential reasons for this ongoing crypto retreat:

The first major factor contributing to the decline in cryptocurrency prices is the anticipation that the Bank of Japan (BoJ) will hike interest rates by 0.25% on Friday, bringing the official cash rate to 0.50%, the highest level since 2008. The BoJ last raised rates in August 2024, leading to a sharp drop in cryptocurrencies and other assets, primarily due to the unwinding of the Japanese yen carry trade. If the BoJ follows through with this rate hike, it could trigger another decline in the market, although it is expected to be on a smaller scale than the previous one.

Closely related to the BoJ rate hike, the market is also awaiting the Federal Reserve’s interest rate decision, which is expected next week. The potential for a more hawkish stance by the Fed is another reason for the recent downturn in Bitcoin and altcoin prices. If the Fed raises interest rates or adopts a more aggressive tone, this could drive government bond yields higher, making risk assets like cryptocurrencies less attractive to investors. The higher bond yields would likely cause a shift in capital away from the cryptocurrency market, exacerbating the bearish sentiment.

Another reason for the falling crypto prices is the lack of concrete action from newly inaugurated President Donald Trump regarding cryptocurrency. Despite initial expectations that Trump would take a crypto-friendly stance, including possibly creating a strategic Bitcoin reserve, he has not made any significant moves since taking office. He has not mentioned cryptocurrency publicly or signed any executive orders related to the industry, leading to a decline in market optimism. In fact, the likelihood of Trump establishing a Bitcoin reserve has dropped to just 40% on Polymarket, indicating that the market is beginning to question his commitment to crypto.

The price declines could also be attributed to the classic “buy the rumor, sell the news” pattern. In the lead-up to major events, such as Trump’s inauguration, investors may have purchased assets in anticipation of positive outcomes. However, after the event occurs, many investors sell off their positions to lock in profits, causing the price to fall. This typical market behavior likely contributed to the sell-off in both Bitcoin and altcoins this week, as the market reacted to the reality of Trump’s presidency, which has not yet provided the anticipated boost to cryptocurrency prices.

In addition to external market factors, Bitcoin has also formed a double-top pattern on the price chart at $108,100, which is considered a bearish reversal signal. A double-top pattern consists of two peaks at similar price levels, followed by a drop to a neckline. In this case, the neckline is at $89,305, and if the price falls below this level, the pattern suggests that the price could decline to a target of $74,000.

If Bitcoin remains below the $108,100 level, it will be in a vulnerable position, and the potential for further downward movement could weigh on investor sentiment, dragging other altcoins down with it. Conversely, if Bitcoin breaks above the $108,100 resistance point, it could invalidate the bearish outlook and open the door for a potential rally, with the next target being the psychological level of $110,000.

The recent downturn in Bitcoin and altcoins can be attributed to a combination of macroeconomic factors, investor sentiment, and the lack of expected moves from President Trump. The potential interest rate hikes from the Bank of Japan and the Federal Reserve, along with the lack of crypto-related initiatives from Trump, are contributing to the bearish pressure on the crypto market. Additionally, the double-top pattern in Bitcoin’s price charts adds another layer of risk, suggesting the potential for further declines if the pattern plays out.

As a result, the crypto market remains in a precarious position, and investors will need to closely monitor these key factors to determine whether the current downtrend will continue or if a reversal is on the horizon.