Why did Bitcoin drop today?
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Bitcoin price faced strong selling pressure during the Asian session, falling below the $104,000 mark. The market generally expects the Federal Reserve to announce a 25 basis point rate cut today, which was supposed to spark some optimism. However, the market remains cautious, especially before the Fed's rate cut decision, with traders choosing to wait and see.
Market Uncertainty Before the Fed's Rate Cut
As the Federal Reserve is about to announce its rate cut decision, Bitcoin has encountered a significant pullback. Mark Cabana, an executive at Bank of America, pointed out that due to market concerns that the Fed might maintain a tightening monetary policy for too long, a 25 basis point rate cut is expected to be announced. Although the U.S. labor market has slowed, inflation remains high, with the consumer price index (CPI) in November soaring from 2.4% in September to 2.8%. Analysts generally believe that Fed Chairman Powell will release key information regarding monetary policy for 2025 during the meeting.
On-Chain Data Reveals Short-term Selling Pressure
On-chain data analysis platform Santiment reports that recent short-term Bitcoin holders (investors holding for 90 to 365 days) have chosen to take profits when Bitcoin price exceeded $100,000. In contrast, long-term holders (those holding for over a year) showed lower trading activity after Bitcoin price surpassed $100,000. This indicates that market participants are liquidating positions, with some investors choosing to realize short-term gains before price retracements.
Expectations of Bitcoin Pullback: Historical Patterns May Recur
Cryptocurrency analyst Rekt Capital stated that Bitcoin may experience a pullback in the 7th week of entering price discovery. Historical data shows that Bitcoin experienced similar pullbacks in 2013, 2017, and 2021. For instance, in 2017, Bitcoin pulled back 34% in the 8th week of price discovery; while in 2021, the price dropped 16% in the 6th week. Therefore, Rekt Capital predicts that Bitcoin price may experience a pullback again, possibly falling below $100,000.
Overall, the Fed's rate cut decision, market expectation adjustments, and selling behavior from short-term Bitcoin holders have collectively pushed the Bitcoin price downward.
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