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The crypto market is bracing for significant volatility as a massive options expiry looms this Friday, with nearly $20 billion in Bitcoin and Ethereum options set to expire. This event, representing almost half of the total open interest on Deribit, could lead to increased market choppiness. Traders are likely to "roll" their options to later dates to maintain their market positions. Amidst this, Bitcoin's struggle to surpass the $100,000 mark might prompt investors to shift towards altcoins, a trend previously observed when Bitcoin was at similar price levels. Despite a generally bullish seasonal period, Bitcoin has seen a 2% decline over the past month, diminishing expectations for a traditional "Santa rally." The market's mood is cautious, influenced by profit-taking and the U.S. Federal Reserve's indication of fewer rate cuts next year. Analysts suggest that a potential drop to $90,000 could attract buyers, potentially halting further declines, although a more drastic fall to $70,000 remains a possibility.
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The bitcoin mining ecosystem has hit a new peak with the mining difficulty adjustment soaring to 110.45 trillion, marking it as the eighth consecutive positive adjustment. This escalation in difficulty intensifies the competition among miners, making it increasingly challenging to mine new blocks and earn bitcoin rewards. As a result, some publicly traded mining companies have begun to explore alternative revenue streams in high-performance computing and artificial intelligence, unable to sustain operations solely through bitcoin mining. Notably, MARA Holdings has also ventured into issuing convertible bonds to acquire more bitcoin and optimize revenue through lending. Historical data shows mixed outcomes following such difficulty adjustments; for instance, after the China mining ban in 2021, bitcoin experienced a bull run followed by a bear market, while in 2018, similar adjustments preceded both market highs and lows. Despite these fluctuations, the network's hashrate remains robust, currently at 775 EH/s, with projections suggesting it could reach 1 zettahash per second before the next halving.
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Bitcoin's reserves on exchanges have dwindled to levels not seen since June 2018, with only 2.35 million BTC available as of January 13, according to CryptoQuant data. This decline is largely attributed to institutional investors, including hedge funds, who are capitalizing on the current dip in Bitcoin's price. André Dragosch from Bitwise highlighted that hedge funds are increasing their exposure to Bitcoin, suggesting a potential supply shock if demand continues to outstrip the available supply. Despite this, Bitcoin's recovery to surpass the $100,000 mark is hindered by low trading volumes, as noted by Ryan Lee from Bitget Research. The broader cryptocurrency market also reflects this trend, with trading volumes at their lowest since before the U.S. elections, indicating a lack of market excitement. However, analysts remain optimistic, predicting Bitcoin could reach a cycle top above $150,000 by late 2025, driven by an expected increase in global money supply.
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Laser Digital, the digital asset subsidiary of Nomura, predicts that 2025 could be a significant year for cryptocurrency exchange-traded funds (ETFs) in the U.S. The report highlights that over twelve crypto ETFs might be launched if approved by the SEC, with asset managers having already submitted twelve filings. These potential ETFs include innovative products like a ProShares ETF that tracks the S&P 500's return in bitcoin, a combined bitcoin/ether ETF, and ETFs based on litecoin, XRP, and Solana. The report suggests that a bitcoin/ether ETF is most likely to receive approval first. The success of spot bitcoin ETFs in the previous year, exemplified by Blackrock's iShares Bitcoin Trust, which amassed $53 billion in assets, underscores the potential for these new ETFs. The regulatory environment is also expected to become more favorable with the appointment of Paul Atkins as SEC chairman and the anticipated support from a crypto-friendly administration under President-elect Donald Trump.
