The recent decline of Bitcoin from 108,000 to 100,000 is exactly the same as the decline from 98,000 to 90,000 last month. For an asset as cyclical as Bitcoin, large fluctuations are normal. As long as you can find the reason behind each rise or fall, you can remain unfazed. For me, wasn't this what I just experienced last month? I already know what will happen next, it's boring!
Let's first talk about last night's decline. Although the market was in a panic, and altcoins were scared out of their wits, I really think it's nothing, just a normal correction. If we set aside the several negative events from last night and compare it with the Bitcoin price action during the period from November 21 when it surged from 90,000 to 100,000, you'll notice that Bitcoin always goes through a major correction before reaching significant milestones.
I'm not surprised by this decline at all because this is exactly what we just experienced last month. I am also prepared for the subsequent price action. Bitcoin started to return to an upward trend from November 27, officially breaking the 100,000 mark in a week. Even if this plot isn't exactly the same, it's very similar. By next weekend, we will see Bitcoin above 110,000. If you don't believe it, you can take a screenshot now.
Now let's rationally analyze a few reasons for this decline:
(1) Hawkish statements from the Federal Reserve
Last night, the Federal Reserve did lower interest rates by 25 basis points as expected, but the dot plot slashed the forecast for four rate cuts next year to just two, and the four cuts in 2026 were also reduced to two. This is arguably the most hawkish dot plot of the year. Powell's post-meeting statement was also filled with hawkish tones, emphasizing a slowdown in rate cuts and concerns about a rebound in inflation. The most outrageous part was when Powell mentioned Bitcoin directly, saying, 'We are not allowed to hold Bitcoin.' This statement caused the market to crash.
Of course, it wasn't just the cryptocurrency market that crashed. The Dow fell for ten consecutive days, marking its longest losing streak since 1974, with a drop of over a thousand points. The S&P fell nearly 3%, marking the largest drop on a rate cut day since 2001, and the Nasdaq fell by more than 3%. Tesla dropped by over 8%, etc. In summary, the earlier decline in U.S. stocks dragged down the cryptocurrency market, and then after Powell's mention, the crypto market fell again.
(2) MicroStrategy unable to purchase Bitcoin
MicroStrategy announced last night that it will pause issuing convertible bonds to purchase Bitcoin in January because January 2025 is the lock-up period for MSTR stock. During this period, MicroStrategy cannot raise funds through on-market transactions (ATM) to buy Bitcoin, and there are two interpretations of the specific duration of this lock-up period: some believe it is a full month, while others predict it starts from January 14 for 30 days. Currently, MicroStrategy has not officially responded to this rumor.
In any case, this news is definitely negative for Bitcoin. In the recent waves of Bitcoin increases, we have seen news of MicroStrategy adding to its position. The fund flow for Bitcoin ETFs has also been affected by MicroStrategy's purchases. Last night, Bitcoin ETFs only saw an inflow of $275 million, which is half of this week's average.
However, in the long term, Bitcoin's current decline is nothing!
Regarding Powell's bearish stance on Bitcoin, it is known that Trump is bullish. Now Trump's power is basically at its peak in the U.S. Removing Powell is just a matter of words. Even if he isn't ousted, Arthur Hayes believes Trump can counterbalance Powell through his nominated Treasury Secretary, Scott Bessent. In any case, this market decline is a bit impulsive; rational thinking should distinguish between major and minor players.
As for MicroStrategy pausing its Bitcoin purchases in January, this is only temporary. They will still have to buy in February and March, and given that the funds remain unchanged, the purchasing speed will increase later. Additionally, there are still $16 billion in FTX compensation to be injected into the market in the first quarter of next year, along with various states' strategic reserve plans, which the Federal Reserve cannot control. The Federal Reserve is just a money-printing institution; the Treasury is the one that spends.
Therefore, the long-term upward trend of Bitcoin has not changed. This correction is just a way to clear leverage and prepare to welcome new investors.
That's all for today. During a bull market, many people hope to engage in discussions. If you really can't manage it on your own in the crypto world, don't force yourself. You can come to me for guidance, understand the latest information, make plans, embrace the bull market, increase your win rate, and say goodbye to being stuck at high positions.
$POL $MOVE $ME
