Bitcoin prices rallied to their latest all-time high during the week through Friday, December 20, as multiple variables, including some notable government developments, caused the digital currency to experience some compelling upside.
The world’s most well-known cryptocurrency reached successive highs on Monday, December 16 and Tuesday, December 17, surpassing $107,000 on the former and $108,000 on the latter, according to Coinbase data from TradingView.
After rallying to these levels, the digital asset surrendered some of its gains, suffering repeated pullbacks and falling to nearly $92,000 on Friday, December 20, additional Coinbase figures provided by TradingView reveal.
Several analysts offered their take on what fueled these sharp price movements, including Alex Lin, cofounder and general partner at venture capital firm Reforge, which focuses on investments in blockchain and frontier tech.
“Bitcoin\'s surge to an all-time high of over $108,000 was propelled by a combination of factors that began early last week with expectations of Federal Reserve rate cuts and continued strong market sentiment favoring the asset after it crossed the psychological $100,000 threshold,” he stated via email.
“This momentum was further supported by reduced BTC supply on exchanges reported from earlier this month, suggesting investors were moving their BTC into personal custody, which decreased available supply against growing demand and increased scarcity,” said Lin.
“And as BTC approached and subsequently surpassed previous highs going into this week, short positions were squeezed, resulting in additional buying pressure as those shorting had to cover their positions,” he continued.
“However, the all-time high was short-lived as the Fed\'s announced rate cuts on Wednesday were smaller than expected,” Lin stated, referring to the Federal Open Market Committee’s announcement, released on December 18, which indicated that the group of policymakers had opted to reduce the target range for the federal funds rate by 25 basis points.
“The hawkish stance and cautious monetary policy catalyzed a BTC sell-off, followed by significant liquidations in the derivatives market, further exacerbating the price drop as positions were forcefully closed,” he added.
Brady Swenson, head of education at Swan Bitcoin, also weighed in via email, offering his thoughts on the price declines that bitcoin experienced later in the week.
“Bitcoin\'s price dip is likely more related to Fed Chair Jerome Powell\'s recent comments indicating fewer rate cuts in 2025 than it is the shutdown drama,” he stated, referring to the press conference that Powell held on Wednesday, December 18, in addition to the potential government shutdown that lawmakers managed to avert on Friday, December 20.
However, these developments simply make the digital asset look more appealing, Swenson claimed.
“The looming government shutdown and the course changes with monetary policy both underscore the appeal of Bitcoin\'s transparent, code-based policies, contrasting with the often opaque and confusing process of human consensus building on major monetary and fiscal decisions,” he stated.
Greg Magadini, director of derivatives for digital asset data provider Amberdata, also commented on the price declines that bitcoin experienced after reaching an all-time earlier in the week.
“With the markets at all-time highs, relatively strong CPI numbers last week, and a strong labor market, the Fed reduced its guidance for 2025 rate cuts to a more hawkish tone,” he wrote via email on Friday, December 20.
Magadini emphasized that after the recent U.S. election, the crypto markets’ long exposure vastly outweighed its short exposure, which created an environment that made it far easier for pullback to materialize “as investors re-evaluated the US rate landscape and fiat USD rallied.”
Going forward, bitcoin is in a position to appreciate, Tim Enneking, managing partner of Psalion, said via emailed comments.
“With a wipeout back to the low 90s, the stage is now really set well for another leg up,” he stated.
“Correlation with ‘risk on’ fiat assets will still be higher than the crypto ecosystem would like, but crypto is 24/7 and fiat markets are open about 20% of that, so the crypto bull will still have plenty of room to run,” said Enneking
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and SOL.