After four consecutive weeks of upward movement, BTC prices suddenly plunged after reaching a historical high of $108,353 on the 17th, and quickly dropped to $92,232 within 3 days, with a maximum drop of 14.87%. At present, as market sentiment gradually stabilizes, the price has recovered to around $94,000 and entered a consolidation phase. At present, the support level of BTC price is around $92,000. At the same time, altcoins have suffered serious losses, and the prices of many tokens have even fallen to the prices before October, wiping out the Trump effect increase brought about by Trumps election as US President (the above data comes from Binance spot, 17:00 on December 10).
Although the market trading volume has decreased, the trading volume of BTC spot ETFs remains strong, averaging $4.4 billion per day, reflecting that the market activity is still high. In addition, MicroStrategy has officially entered the Nasdaq 100 Index on December 23, which may open the door for mainstream US funds to passively allocate BTC.
Market Interpretation
On October 23, all three U.S. stock indexes rose, with the Dow Jones Industrial Average rising to 70 points and the Nasdaq Composite Index rising by about 1%. Due to the Christmas holiday, trading sentiment was flat on Monday. Among them, the BTC big player Micro Strategy was affected by the BTC price fluctuations and its stock price fell by 8.8%. The hawkish signal released by Powell caused sharp fluctuations in U.S. stocks. However, considering that the market has high expectations for the stimulus policies adopted by the new U.S. government after taking office, the U.S. stock market may stabilize after short-term market fluctuations.
BTC enters the year-end consolidation phase, investors need to pay close attention to the trend and wait for key signals
Last week, BTC experienced year-end consolidation, falling from a historical high of $108,353 to a local low of $92,000, with a maximum drop of about 15%. The internal reason for BTCs market correction this time is mainly because the profit margin of short-term profit earners in this cycle has reached more than 30%, and some of the profit earners chose to lock in profits, resulting in a rapid increase in the probability of a correction. The external factors are that the Feds interest rate cuts, the Trump effect, MicroStrategys purchase of BTC, etc. have passed the initial strong period and entered the pre-holiday rest period. In addition, the Christmas holiday, which has a greater impact on BTC ETFs, has led to BTC entering an adjustment phase.
BTC sell-off: Buying power game, price may reach new highs amid volatility
The behavior of short-term and long-term holders has a significant impact on price movements. According to the latest data from EMC Labs eMerge Engine, a total of 268,581 BTC were transferred to exchanges this week, of which short-term holders contributed 256,826 and long-term holders contributed 11,755. This is the second largest sell-off week since November.
Nevertheless, the buying power of the market, especially through the funds of BTC ETF, successfully absorbed this part of the selling pressure. According to eMerge Engine data, the BTC inventory of CEX decreased by 27,901 this week. In addition, the floating profit of short-term holders dropped from the previous high of 33% to 25%, which is generally regarded as a neutral level in a bull market.
It is worth noting that the selling volume of long-term holders, which has a decisive influence, has been declining continuously. This indicates that the BTC price is expected to pull back to above $100,000 and is expected to gradually climb in fluctuations.
MicroStrategy is officially included in the Nasdaq 100 and has increased its BTC holdings for 7 consecutive weeks, helping the long-term development of BTC prices
On December 23, MicroStrategy (MSTR.US) announced that it had purchased an additional $560 million in BTC at an average price close to BTCs historical high, marking the seventh consecutive week of BTC holdings. According to documents filed with the U.S. Securities and Exchange Commission, MicroStrategy purchased 5,262 BTC at an average price of approximately $106,662 between December 16 and 22, the smallest amount purchased in recent weeks.
During the same period, MSTR was included in the Nasdaq 100 Index on December 23. Passive funds like QQQ (Invesco QQQ Trust, an ETF issued by Invesco that tracks the Nasdaq 100 Index) will be forced to automatically purchase MSTR, and MSTR in turn will be able to use these funds to buy more BTC.
The entire passive investment ecosystem of traditional finance will unconsciously buy more BTC because MSTR is included in major indexes, just like they don’t realize they hold NVIDIA shares. Therefore, as long as MSTR continues to use these funds to buy more BTC, the buying of BTC will continue to grow.
Macro dynamics
The Feds hawkish rate cut disturbed the market, and cryptocurrencies experienced a Black Thursday
On December 18, the Fed lowered the target range of the federal funds rate by 25 basis points for the third time, to between 4.25% and 4.50%. Powell made it clear that the time for controlling inflation was not as expected, and the various data of the US economy were strong. The Fed was very cautious about the pace of interest rate cuts next year. The market generally believes that the Fed will lower the markets expectations of interest rate cuts in 2025, reducing the interest rate cuts next year from more than 3 times to less than 2 times.
At the same time, Powell declared: The Federal Reserve is not allowed to hold BTC and is not considering participating in the governments BTC reserve plan. The Feds hawkish turn also suppressed the speculative sentiment released by Trump in the crypto market.
Affected by the uncertainty of the Trump administration, US consumer confidence fell in December for the first time since March
According to data released by the Conference Board on Monday, the consumer confidence index fell to 104.7 in December, lower than the market expectation of 113.2, which is the median level of the operating range in the past two years. Among them, the confidence index of consumers over 35 years old declined.
Consumers are less optimistic about business conditions and their own income prospects. Indicators measuring expectations for the next six months and indicators measuring current conditions have both declined, which may further affect the markets confidence in a soft landing for the US economy.
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