The new year is off to a rough start for crypto investors as digital assets continue to retreat from their recent highs.
Bitcoin tumbled 5% on Tuesday to around $97,000, while crypto exchanges closed out $205 million worth of open futures contracts within the span of one hour to prevent further losses. In the last 24 hours, the overall crypto market has lost 6% of its total market cap, dragged down by Bitcoin’s decline after it had initially soared after the November election.
Omid Malekan, a Columbia University business professor, told Fortune the recent price drop indicates that much of the excitement triggered by the victory of pro-crypto President-elect Donald Trump is fading, leaving investors looking for the next catalyst that may reignite the crypto market.
“The positive news from the election is mostly priced in,” Malekan said. “Trump takes office in a few weeks. There will be this question of when the rubber hits the road, what is he actually going to do?”
Once a crypto-skeptic, Trump had a dramatic change of heart during the 2024 election cycle, appealing to crypto voters with promises to establish a national Bitcoin stockpile, appoint crypto advocates to government positions, and support the adoption of industry-friendly regulation.
While Trump has already followed through on some of these promises, including appointing an AI and crypto czar, it remains to be seen how far he’ll go once in office.
“We’re definitely going to have a Republican commissioner for the SEC and the CFTC, and we’re definitely going to have them be more pro-crypto than under the previous administration,” Malekan said, referring to the Securities and Exchange Commission and the Commodities Future Trading Commission, two key crypto industry regulators. “So the question now is, what are the details of the different rules they’re going to implement? How pro-crypto will they be?”
The market’s mini-downturn follows a monster run triggered by Trump’s reelection and the Federal Reserve’s recent interest rate cuts that sent Bitcoin smashing through the $100,000 mark for the first time, to an all-time high of $108,000 on Dec. 17. Since then, the crypto market has retreated, with Bitcoin falling to as low as $92,000 in December before partially recovering last week.
“Markets look ahead,” Malekan said. “What if we don’t get the whole wishlist?”