Monthly update December | What will 2025 bring for Bitcoin?
The year 2024 has come to an end. It has been an eventful year for Bitcoin: a new all-time high in March, a halving in April, several ETFs hitting the market, and to top it all off, the $100,000 mark has been surpassed. The elections in the US have caused quite a stir, which is still reflected in the current price. We will delve into the price drop in December and also discuss the Travel Rule that went into effect this week.
Interest rate cut by the FED One of the most prominent causes of the sudden drop was a speech that took place on December 19. Jerome Powell, the chairman of the Federal Reserve (Fed), spoke at the Federal Open Market Committee (FOMC) meeting regarding monetary policy. This is determined by the FOMC, particularly through decisions about interest rates and the regulation of the money supply.
It was announced that the Fed would lower interest rates by 25 basis points, bringing them to a range of 4.25% to 4.5%. While this initially seems positive, Powell emphasized that the fight against inflation is not yet won. This resulted in uncertainty in the markets, leading to a decrease in liquidity for riskier assets like cryptocurrencies.
Powell also indicated that inflation expectations for 2025 have been raised to 2.5%, which exceeds the previous target of 2%. The outlook for interest rate cuts is less optimistic than previously thought, which could slow down market recovery. Additionally, Powell dismissed rumors about a national BTC reserve under the Trump administration, which was disappointing news for many crypto investors.
In the 24 hours that followed, the price declines led to over $800 million in liquidations, according to data from the blockchain analysis platform CoinGlass. Bitcoin dropped to a low of $98,800, a decline of nearly $10,000 from its recent all-time high. XRP, which had previously seemed to be recovering at $2.70, temporarily fell to $2.20. Ethereum and Solana were also affected. Meanwhile, all coins appear to be slowly recovering.
Tax benefits
Nic Puckrin, a crypto expert who founded Coin Bureau, stated on X that 'tax-loss harvesting' could also be related to the drop in BTC. Tax-loss harvesting is a strategy used by investors to reduce their tax liabilities by realizing losses on investments.
In this strategy, an investor sells assets that have decreased in value to book a loss. This loss can then be used to offset any gains from other investments, thereby reducing the tax burden on those gains. As a result, some investors may quickly sell losing positions in the last days of the year, which can exert downward pressure on prices.
Puckrin also mentioned the 'January Effect.' After investors sell their stocks at the end of the year to realize tax losses, they often buy stocks back in January, which can lead to a price increase. This suggests that price increases are more likely to occur in January. Other contributing factors include year-end bonuses being invested and an increased sense of optimism in a new year. This could mean that Bitcoin may bloom again in the first month.
Inauguration Trump
Another key moment to watch is the inauguration of Donald Trump, which takes place on January 20. What Bitcoin will do on and after that date remains to be seen. Nevertheless, there are research firms, including Steno Research, that believe 2025 will be Bitcoin's best year ever. They predict that Bitcoin will rise to $150,000, while Ethereum is expected to reach the $8,000 mark. It will therefore be interesting to keep an eye on all altcoins in the coming year.
This is expected to make it cheaper to use the network. Avalanche hoped this would have a positive impact on the price, but the outcome was different. When the market declined, AVAX followed suit, falling below the support zone of $43. However, analysts say this is a healthy correction and not a cause for panic.
The volume remains positive. According to analysts, it is crucial for the price to stay above $27, as falling below this level could signal weakness in the market. A further decline in BTC could also put additional pressure on AVAX.
The idea is that personal data travels along with the transaction, hence the name "Travel Rule." Initially, in 2019, this was only intended for financial institutions, but from now on, Crypto Asset Service Providers (CASPs) are also required to pass on this information. Coinmerce falls under this category.
For every transaction that takes place, all CASPs must now send certain information along. This primarily includes the names of the sender and receiver, wallet address details, and personal address information. Since most of this data has already been provided during the KYC process, you as the sender do not need to provide additional information about yourself, especially if it involves your own wallet. However, if you are transferring to an unhosted wallet that is not on a central exchange, you will need to provide additional information about the recipient.
All these extra measures aim to enhance security, transparency, and protection against money laundering, fraud, and other illegal activities. The implementation of the Travel Rule may vary between different countries and jurisdictions, depending on their specific regulations and how they have incorporated the FATF guidelines. Within the European Union, there are established rules, and all transaction data is passed on to the financial institutions registered here. Each institution may collect the data in its own way. For Coinmerce, the safety of all customers and their assets is the highest priority, and we are committed to ensuring this.
From all-time high to stable
In December, Bitcoin achieved several records. The €100,000 mark was even surpassed, but halfway through the month, the coin dropped back to $92,000. Events in the United States have particularly influenced this situation. Following this decline, BTC is slowly climbing back up.Interest rate cut by the FED One of the most prominent causes of the sudden drop was a speech that took place on December 19. Jerome Powell, the chairman of the Federal Reserve (Fed), spoke at the Federal Open Market Committee (FOMC) meeting regarding monetary policy. This is determined by the FOMC, particularly through decisions about interest rates and the regulation of the money supply.
It was announced that the Fed would lower interest rates by 25 basis points, bringing them to a range of 4.25% to 4.5%. While this initially seems positive, Powell emphasized that the fight against inflation is not yet won. This resulted in uncertainty in the markets, leading to a decrease in liquidity for riskier assets like cryptocurrencies.
Powell also indicated that inflation expectations for 2025 have been raised to 2.5%, which exceeds the previous target of 2%. The outlook for interest rate cuts is less optimistic than previously thought, which could slow down market recovery. Additionally, Powell dismissed rumors about a national BTC reserve under the Trump administration, which was disappointing news for many crypto investors.
In the 24 hours that followed, the price declines led to over $800 million in liquidations, according to data from the blockchain analysis platform CoinGlass. Bitcoin dropped to a low of $98,800, a decline of nearly $10,000 from its recent all-time high. XRP, which had previously seemed to be recovering at $2.70, temporarily fell to $2.20. Ethereum and Solana were also affected. Meanwhile, all coins appear to be slowly recovering.
Tax benefits
Nic Puckrin, a crypto expert who founded Coin Bureau, stated on X that 'tax-loss harvesting' could also be related to the drop in BTC. Tax-loss harvesting is a strategy used by investors to reduce their tax liabilities by realizing losses on investments.
In this strategy, an investor sells assets that have decreased in value to book a loss. This loss can then be used to offset any gains from other investments, thereby reducing the tax burden on those gains. As a result, some investors may quickly sell losing positions in the last days of the year, which can exert downward pressure on prices.
Puckrin also mentioned the 'January Effect.' After investors sell their stocks at the end of the year to realize tax losses, they often buy stocks back in January, which can lead to a price increase. This suggests that price increases are more likely to occur in January. Other contributing factors include year-end bonuses being invested and an increased sense of optimism in a new year. This could mean that Bitcoin may bloom again in the first month.
Inauguration Trump
Another key moment to watch is the inauguration of Donald Trump, which takes place on January 20. What Bitcoin will do on and after that date remains to be seen. Nevertheless, there are research firms, including Steno Research, that believe 2025 will be Bitcoin's best year ever. They predict that Bitcoin will rise to $150,000, while Ethereum is expected to reach the $8,000 mark. It will therefore be interesting to keep an eye on all altcoins in the coming year.
Big upgrade Avalanche launched
A historic upgrade has taken place for Avalanche (AVAX). This update, named Avalanche9000, introduces customizable and interconnected Layer 1 (L1) chains, reducing costs for validators. You no longer need 2,000 AVAX to participate in the Primary Network.This is expected to make it cheaper to use the network. Avalanche hoped this would have a positive impact on the price, but the outcome was different. When the market declined, AVAX followed suit, falling below the support zone of $43. However, analysts say this is a healthy correction and not a cause for panic.
The volume remains positive. According to analysts, it is crucial for the price to stay above $27, as falling below this level could signal weakness in the market. A further decline in BTC could also put additional pressure on AVAX.
New in 2025: what is the Travel Rule?
As of December 30, 2024, the Travel Rule has been implemented in Europe, established by the Financial Action Task Force (FATF). This rule applies to financial institutions, including cryptocurrency exchanges, and requires that certain information about the sender and receiver of a transaction be collected and transmitted when money or value is transferred.The idea is that personal data travels along with the transaction, hence the name "Travel Rule." Initially, in 2019, this was only intended for financial institutions, but from now on, Crypto Asset Service Providers (CASPs) are also required to pass on this information. Coinmerce falls under this category.
For every transaction that takes place, all CASPs must now send certain information along. This primarily includes the names of the sender and receiver, wallet address details, and personal address information. Since most of this data has already been provided during the KYC process, you as the sender do not need to provide additional information about yourself, especially if it involves your own wallet. However, if you are transferring to an unhosted wallet that is not on a central exchange, you will need to provide additional information about the recipient.
All these extra measures aim to enhance security, transparency, and protection against money laundering, fraud, and other illegal activities. The implementation of the Travel Rule may vary between different countries and jurisdictions, depending on their specific regulations and how they have incorporated the FATF guidelines. Within the European Union, there are established rules, and all transaction data is passed on to the financial institutions registered here. Each institution may collect the data in its own way. For Coinmerce, the safety of all customers and their assets is the highest priority, and we are committed to ensuring this.