Cryptocurrency Struggles as Stock Markets Surge to New Highs

Bitcoin and other major cryptocurrencies experienced declines on Wednesday, with the total crypto market value falling 1.4% to $2.97 trillion, slipping below the $3 trillion mark. Bitcoin was trading around $86,900, unable to maintain a position above $90,000 for the third consecutive day. Ether decreased by 1.5% to approximately $2,927, while XRP, Solana, and Dogecoin recorded larger losses, with Solana dropping nearly 3% and XRP nearly 2%.

This downturn occurred even as some stock indexes reached new highs, highlighting a preference for safer investments over high-risk assets. Global stocks hit another record, bolstered by strong US growth data that supported expectations for improved corporate earnings.

MSCI's All Country World Index rose for the fifth consecutive session on Wednesday, increasing its year-to-date gain to 21%. Asian stocks added 0.2%, driven by technology shares after the S&P 500 closed at a record high on Tuesday. Trading volumes were light ahead of the Christmas holiday, with futures indicating a subdued open in Europe.

Market Analysis

According to Alex Kuptsikevich, chief market analyst at FxPro, the market is showing signs of increased seller control, with repeated rebounds failing to sustain momentum. "The market's inability to replicate a strong rebound from recent lows suggests mounting pressure from sellers," Kuptsikevich noted in an email. He added that as cryptocurrencies remain far from recent highs, larger investors appear to be shifting towards a bear market approach, opting for measured selling instead of sharp, retail-driven movements.

Kuptsikevich also highlighted the broader risk environment. Bitcoin faced selling pressure after briefly surpassing $90,000 earlier this week, despite a strong rally in gold and other precious metals and a weakening dollar. This combination, he explained, indicates investors are reassessing their risk appetite, with the potential for the risk-averse trend to spread further.

"In the coming weeks, we may witness a more pronounced decline in cryptocurrencies, along with a spread of risk aversion to stocks and currencies in developing countries," he stated.

Investment Flows

Data on investment flows also shows investors pulling back. CoinShares reported that global investment products saw $952 million in outflows last week, breaking a three-week streak of inflows. Bitcoin investment products recorded $460 million in outflows, while Ethereum funds lost $555 million. However, XRP and Solana funds saw inflows of $63 million and $49 million, respectively.