Week by numbers
The last week on the cryptocurrency market has seen a downward trend. The price of the largest cryptocurrency, Bitcoin, fell by approximately 5%, the second-largest cryptocurrency, Ethereum, by about 7%, and the total value of the rest of the cryptocurrency market (excluding the largest stablecoins) dropped by around 9%.
Bitcoin's price held its ground slightly better than the broader cryptocurrency market during the decline, leading to a rise in Bitcoin dominance by almost 1% (about half a percentage point). As Ethereum's price dropped more than Bitcoin's, the ETH/BTC ratio decreased by approximately 1.5%.
Among the tokens traded on the Kvarn X trading platform, the steepest weekly declines were seen in the meme coin WIF (-24%), Fantom (FTM, -24%), and CRV (-22%). Few assets rose during the downtrend week, including XDC (+14%) and SUI (+3%).
Market Commentary
The most significant market event of the past week occurred on Tuesday, January 8, 2025. The promising uptrend in the cryptocurrency market, which had started at the turn of the year, suddenly reversed into a downturn, wiping out nearly all the early-year gains within two days.
As is typical, multiple simultaneous factors were behind the price movement. One clear catalyst was likely the statistics released on Tuesday regarding U.S. employment trends. The employment figures exceeded many expectations, suggesting that the U.S. economy remains relatively strong.
These positive news had, as often is the case, a negative impact on the prices of risk assets. The sustained strength of the economy reduced market expectations for the Federal Reserve to lower interest rates during 2025. Many analysts currently expect the Fed to cut rates only once this year. Persistently high rates in turn reduce the relative attractiveness of risky assets, prompting a sharp price drop in the cryptocurrency market following the positive employment data.
What should we expect from the cryptocurrency market next?
In the short term, the situation remains challenging. The yield on the U.S. 10-year Treasury bond has risen sharply in recent weeks, often signaling weaker periods for cryptocurrency prices.
At the same time, the stock market, which saw strong growth in 2023 and 2024, has faltered since December, as indicated by the decline in the Relative Strength Index of the S&P 500 index.
As long as the 10-year Treasury yields remain high and the stock market keeps stagnating, it’s worth recognizing that the overall investment market context does not particularly favor the high-risk end of the spectrum, including the cryptocurrency market.
Against this backdrop, the cryptocurrency market’s performance, even with the recent correction, can be considered relatively resilient. While the stock market is only a couple of percentage points above its level before the U.S. presidential elections, the price of Bitcoin, the largest cryptocurrency, remains nearly 40% higher.
Our interpretation is that this resilience in a challenging environment is a promising sign and suggests positive price development for the cryptocurrency sector once broader investment market risk appetite begins to return.
From a technical analysis perspective, the past two days of price decline have brought Bitcoin’s price back to around $90,000, a level that has repeatedly acted as the lower bound in the sideways movement of the past two months.
We wouldn’t be surprised if, this time as well, we see a bounce from the $91,000–$92,000 range toward at least the middle of the current range. On the other hand, a drop below $91,000 would be notable and could open the door to a deeper correction.
The next market-moving event may occur as early as Friday, January 10, 2025, when additional U.S. employment statistics are released. The most likely scenario seems to be that the price risk associated with employment data has already materialized this week, leaving room primarily for a price rebound. However, it’s worth remaining vigilant for both scenarios, as the general investment market sentiment is currently somewhat risk-averse, and any unfavorable data point could catalyze further price declines.
With these thoughts, we leave our readers to follow the intriguing situation in the cryptocurrency market after this sharp price drop. We’ll return next week with the Kvarn Pulse newsletter, so stay tuned!
New tokens added to Kvarn X – Toncoin, Mantle, Kaspa, Render, and Syrup!
The cryptocurrency world is constantly evolving, and we are excited to add these new tokens to our service in the coming days:
Toncoin (TON): Toncoin is the native cryptocurrency of The Open Network (TON), originally developed by Telegram. It offers fast transactions and scalability, making it a potential game-changer in the cryptocurrency market.
Mantle (MNT): Mantle is a Layer 2 scaling solution for the Ethereum ecosystem that uses Optimistic Rollup technology to enhance transaction speed and reduce costs while maintaining Ethereum network security.
Kaspa (KAS): Kaspa is an innovative Proof-of-Work-based blockchain that utilises the GHOSTDAG protocol, enabling fast and secure transactions. It aims to address scalability challenges while maintaining high security and decentralisation.
Render (Solana) (RENDER): Render Network is a decentralised GPU rendering platform that initially operated on the Ethereum blockchain with the RNDR token. Following a community vote (RNP-002), Render Network has expanded its operations to the Solana blockchain, leveraging its low transaction costs and high performance.
Syrup (SYRUP): Syrup is the native token of the Maple Finance ecosystem, replacing the former MPL token. It functions within a decentralised finance (DeFi) platform focusing on institutional lending and yields. The SYRUP token is used for ecosystem governance, staking, and earning rewards.
Ideas for Building a Crypto Portfolio?
If you're wondering how to build a crypto portfolio or how to get started with crypto investing, we offer various theme-based examples in this section as ideas for constructing your portfolio. Please note that nothing in this newsletter constitutes investment advice or should be interpreted as an encouragement to make investment decisions.
Theme Idea: AI Tokens
Artificial intelligence (AI) is one of today’s biggest megatrends. AI tokens have been one of the hottest themes of 2024 in the crypto market.
Crypto projects that combine AI and blockchain technology are particularly interesting for two reasons:
1. Many aim to solve one of AI's biggest issues, data centralization. Projects focused on decentralizing data and/or computing power aim to provide a fairer and thus safer foundation for AI development.
2. These projects’ tokens allow small investors to benefit directly from AI's value creation, potentially more so than publicly traded stocks.
An example of an AI-themed crypto portfolio available on Kvarn X might include:
- Artificial Superintelligence Alliance (FET)
- Render (RENDER)
- Akash Network (AKT)
Stay tuned for more portfolio-building theme ideas in our upcoming Pulse newsletters!
The material contained in the Kvarn Pulse is produced solely for the purpose of marketing communication. Any information conveyed through Kvarn Pulse should not be construed as an offer or an invitation to make any purchase or sale decisions, or as an encouragement to make investment decisions about any investment object. Copying or borrowing the content of the newsletter without Kvarn's express permission is prohibited. The information presented in the newsletter pertains to the situation prevailing at the time of writing, and the information may or may not have changed. Kvarn Capital Oy does not guarantee the accuracy or completeness of the information contained in the newsletter or referred to in the newsletter.
