Bitcoin briefly dropped almost 7% following its historic surge past $100,000, as traders anticipated a potential pullback. The digital asset fell to $92,144 on Friday before stabilizing at $97,325 by 9:05 a.m. in Singapore. This volatility also affected the broader crypto market, which paused its rally driven by President-elect Donald Trump’s support for the sector.

There has been increased demand for bearish positions, such as put options, which give the right to sell at a specific price within a set timeframe. Notable activity has been seen in puts with strike prices of $95,000 and $100,000, with further demand emerging for $75,000 and $70,000 strike prices, according to Amberdata.

"Although there still seems to be room for further gains, it’s expected that investors will take profits," said Josh Gilbert, market analyst at eToro. "Looking at previous cycles, it’s not unusual for Bitcoin to experience 20% to 40% pullbacks during bull markets."

Bitcoin, the largest cryptocurrency, surpassed $100,000 on Thursday, driven by optimism that Trump’s appointment of a digital asset supporter to head the US securities regulator would help push crypto further into the mainstream. Trump has pledged to reverse the Biden administration's crackdown on digital assets and make the US a global crypto hub. He even endorsed the idea of a national Bitcoin reserve, a concept that former US Treasury Secretary Lawrence Summers called "crazy."

On Thursday evening, Trump announced on Truth Social that David O. Sacks would become the White House czar for artificial intelligence and the cryptocurrency industry. "He will work on a legal framework that provides the clarity the crypto industry needs to thrive in the US," Trump wrote.

Trump's backing of cryptocurrencies is boosting sentiment, supported by $32 billion in net inflows into US Bitcoin exchange-traded funds this year. However, with Bitcoin having advanced 45% since the November 5 election, questions are being raised about whether the rally may be due for a pause.

"This surge in volatility over the last 24 hours shows signs of a classic blow-off top," said IG Australia Market Analyst Tony Sycamore. "While this doesn’t signal the end of the Bitcoin bull run, it does suggest that a consolidation phase may be ahead in the coming days or weeks." On the Deribit exchange, options with strike prices of $110,000 and $120,000 for contracts expiring at the end of January show continued optimism for 2025.

Paraphrasing text from "Bloomberg" all rights reserved by the original author.