28 January 2025
Crypto market crashes often show high volatility influenced by various factors, ranging from historical trends to macroeconomic policies. Here are five main reasons that influence crypto market crashes, focusing on Bitcoin profit-taking.
When this article was written on Tuesday (28/01/2025) early morning, the price of Bitcoin was perched in the range of US$99,800, after dropping to its lowest point of US$97,732 on Monday (27/01/2025) evening, below the psychological level of US$100 thousand. In the past week, the price of Bitcoin has fallen by more than 5 percent. This was followed by other cryptos. Cumulatively, the market value of crypto fell by more than 5.38 percent in the past day to around US$3.41 trillion.
Previously, Arthur Hayes argued that selling pressure was inevitable and the price of this crypto could be eroded to US$75,000-70,000 per BTC. Although it could drop that low, he still believes Bitcoin can set a new record of US$250,000 by the end of 2025.
1. Crypto Market Crashes, Profit Taking Related to Bitcoin Halving
Bitcoin's price correction in the past week is also associated with a historical profit-taking pattern connected to Bitcoin Halving. We use the Bitcoin Halving Cycle Profit indicator developed by Kevin Svenson to illustrate this profit-taking action.
The last Bitcoin halving took place on April 19, 2024, analysis using the indicator shows a consistent time pattern after each halving event, with explicit signals for profit-taking and Dollar-Cost Averaging (DCA) strategies.
Based on that indicator, the optimal profit-taking action starts 40 weeks after the halving. Assuming that a week is seven days, then 40 weeks from April 19, 2024 falls on January 24, 2025. During this period, the crypto market is often affected by selling pressure, as Bitcoin's price increase usually reaches a profitable point in the post-halving cycle.
Next, the “last call” or the final period for profit-taking action occurs 80 weeks after the halving, namely October 11, 2025. This last call period marks the final deadline to maximize profits before the potential for a significant price drop enters a bear market phase. Based on historical data, crypto market crashes often occur after this period, as investors start to sell massively.
To restart accumulation using the Dollar-Cost Averaging method, the indicator points to the optimal time being 125 weeks after the halving, which falls on October 30, 2026. At this time, the crypto market has usually reached a significant consolidation or decline phase, making it an ideal time to restart accumulation.
By following these time cycles, investors can take advantage of price patterns that have been consistently identified based on Bitcoin's history. Crypto market crashes provide strategic opportunities for investors to time their market entries and exits more effectively.
2. Tighter Fed Policy
Macroeconomic factors also weighed on market sentiment. The Federal Reserve is expected to cut interest rates only twice in 2025, which is much less than in 2024. This policy limits the flow of liquidity to the risky asset market, including crypto. This condition further strengthens the trend of the crypto market falling, especially coinciding with the post-halving period, when the market tends to weaken. With interest rates remaining high, the appeal of speculative assets such as Bitcoin and altcoins tends to diminish, increasing pressure on the market.
3. Policy Uncertainty from the White House
On the regulatory side, the United States is still in the process of reviewing its approach to crypto assets. There has been talk of making Bitcoin a national strategic reserve asset, but this has not been prioritized. Instead, the government has preferred to clarify the definition and classification of crypto assets. This uncertainty creates additional pressure on the market, as crypto market crashes often occur due to regulatory uncertainty, which makes investors take a cautious stance while waiting for policy clarity.
4. Historical Data: Decline in the Second Quarter
In the context of profit-taking and correction, historical data from Coinglass showing Bitcoin's average return in the second quarter was 26.8 percent, lower than the first quarter's 52.7 percent, provides an overview of a typical market behavior pattern.
The first quarter (January-March), with its higher average returns, usually reflects a period of accumulated optimism in the market. Investors often take advantage of the early momentum of the year to buy assets with the expectation that the upward trend will continue. However, the transition to the second quarter is often accompanied by profit-taking, which causes the crypto market to collapse. This happens because investors who have made significant profits in the first quarter tend to start realizing their profits, causing selling pressure that can hold or lower prices.
In addition, the second quarter (April-June) is often considered a “normalization” phase after the early-year surge. The decline in average returns from 52.7 percent to 26.8 percent indicates a possible price correction amid profit-taking. This correction usually reflects the market’s adjustment to medium-term expectations, especially in the absence of significant positive catalysts. In this context, the crypto market crash is a recurring phenomenon every year.
5. Monthly Trend: January Weak, February Rebounds
In the context of monthly trends, historical data shows that January recorded an average return of 3.73 percent, while February increased to 15.66 percent. This pattern provides additional insight into the seasonal dynamics that often affect Bitcoin price movements, especially early in the year.
January is usually considered a “recovery” month after the high volatility that often occurs at the end of the previous year. With lower average returns, the market tends to stabilize in January, where investors start to position themselves for bigger opportunities in the following months. However, if selling pressure increases, a crypto market crash could occur this month.
February, with its higher average return, reflects the acceleration of market optimism. The 15.66 percent surge on average this month shows that investors are becoming more active, driven by increased liquidity and the entry of more market players looking to capitalize on the potential uptrend. In this context, the crypto market crash could recover quickly, forming the basis for a larger bullish trend in the following months.
This pattern is relevant in profit-taking and accumulation strategies. In January, investors who want to take advantage of relatively stable prices may start accumulating using the Dollar-Cost Averaging approach.
Meanwhile, in February, the stronger upward momentum of prices can be used to prepare for profit-taking in the following months. However, it is still important to anticipate potential pressures that can cause the crypto market to collapse amid market volatility.
The recent crypto market downturn reflects historical patterns and the influence of macroeconomic factors, such as tighter Fed policy and regulatory uncertainty. Despite the sharp correction in Bitcoin prices, optimistic sentiment is still evident with promising long-term projections, such as Arthur Hayes' prediction of the potential for Bitcoin to reach a new record by the end of 2025. The combination of seasonal trends, post-halving profit-taking, and responses to historical data suggest that crypto market dynamics remain complex, but offer strategic opportunities for careful investors.[TR]