The crypto market has erased this year’s gains, after a three-day selloff fueled by strength in the dollar, and as the U.S. government was cleared to sell some of its own bitcoin holdings.
Bitcoin dipped below $92,000 on crypto exchange Binance on Thursday, setting a new low for the year and putting the price further away from December’s record high around $108,000.
The retreat contributed to a pullback in digital assets that had jumped in price in recent weeks, including memecoins and other tokens associated with artificial intelligence-powered chatbots and platforms.
AI agent token AI16Z and the freshly airdropped HYPE have seen the sharpest drawdowns among the top 100 cryptocurrencies by market capitalization, each dropping around 10% in the last 24 hours, market data from CoinGecko shows.
Tokens involving AI agents are dominating crypto mindshare – a quantitative metric produced by AI startup Kaito – while memecoins have been the best-performing sector in the past year.
Spot BTC and ETH exchange-traded funds (ETFs) in the U.S. also saw their second-largest daily withdrawals of all-time on Wednesday with U.S. spot bitcoin ETFs seeing $582.9 million in outflows, while the figure for spot Ethereum ETFs stood at $159.3 million, according to SoSoValue.
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The recent selloff comes as the U.S. Dollar Index (DXY) is trading above 109, a two-year high.
The index tracks the greenback’s strength relative to a basket of foreign currencies. The price of bitcoin and crypto markets tend to have an inverse correlation with DXY.
“It’s remarkable that bitcoin is holding near $100,000 and crypto is holding up well with the dollar at its highest level in over two years,” Seth Ginns, managing partner and head of liquid investments at CoinFund, told Unchained.
Ginns said he expects the administration of President-elect Donald Trump to look to contain further gains in the dollar.
“They probably won’t want the dollar to break out to a new high, which means we’re likely going to see an end to this constant move higher in the dollar, which should be a new tailwind for crypto,” Ginns added.
DB News also reported late Wednesday that the Department of Justice was cleared to sell $6.5 billion worth of bitcoin seized from Silk Road. According to a Dec. 30 court filing, Richard Seeborg, chief U.S. district judge for the Northern District of California, denied a motion to block the forfeiture of 69,370 bitcoins from Silk Road, effectively giving the go-ahead for the government to offload BTC.
Traders are speculating on the tension between the current administration and the upcoming one, considering that Trump has pledged support of the U.S. government stockpiling BTC.
The U.S. government currently holds about 198,109 bitcoins.
According to Reuters, crypto lobbyists are encouraging Trump to issue an executive order in his first 100 days to establish a strategic reserve of bitcoin, provide banking services for crypto firms, and build an advisory committee focused on the crypto space.
Users on prediction-betting platform Polymarket place odds at a 27% probability that Trump will create a Bitcoin reserve in his first 100 days.
“Until the inauguration, we’re probably in a holding pattern,” Ginns further wrote over Telegram. “So there could be some chop in the near-term.”
