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After the Federal Reserve shifted its interest rate expectations last week, BTC prices were revised downward alongside US stocks. This week, with the onset of the Christmas and New Year holidays, global equity markets saw light trading, still following the trend established last week.
BTC opened at $95,091.15 and closed at $93,563.35, recording a 1.60% decline for the week, with a fluctuation of 7.91% and a significant decrease in trading volume.
As the New Year approaches, major global investment banks have released reports projecting the economy and investment markets for 2025. Overall, the outlook is optimistic, though there are also negative perspectives.
Macroeconomic and financial data
After the Federal Reserve shifted its tone last week, the three major US stock indices experienced significant adjustments, gradually recovering this week, but fell again on Friday. Overall, the three major indices recorded weekly gains and are still in an upward structure, but the downward correction triggered by the adjustment of interest rate expectations will take time to conclude.
Last week, after the US dollar index climbed to a high of 108.549, it remained in a high fluctuation this week, closing at 108.029 USD. The dollar continued to rise against the yen, but the Bank of Japan indicated that there is still a possibility of raising interest rates in January. This further increases uncertainty for January; if the Federal Reserve stops tightening in January while the yen resumes rate hikes, the US stock market will face funding pressure.
Under the pressure of a high dollar index, spot gold fell by 2.3% throughout the week.
Thanks to the optimism of major investment banks regarding the US economy and capital markets in 2025, under the backdrop of a high dollar index, one-year Treasury yields have shown a downward trend, while ten-year Treasury yields continue to rise to 4.629.
Stablecoins and BTC Spot ETF
With the downward adjustment of interest rate expectations, the funding trend in the cryptocurrency market has suddenly reversed. Last week, there was still an inflow of $1.2 billion, but this week it has shown an outflow trend, with an outflow scale of $289 million, and both the BTC Spot ETF and stablecoin channels have shown capital outflows.
This outflow of funds has caused a sudden loss of buying power in the market. Although BTC surged above $99,000 this week, it ultimately fell back.
Selling pressure and liquidation
BTC traded mainly between $90,000 and $100,000, primarily from profit-taking of long and short positions, and the peak of selling has passed. As trading sentiment weakened, the scale of selling also significantly decreased this week, and the current selling is comparable to the mid-term period in September. The reduction in selling scale has allowed BTC prices to remain above $90,000.
In terms of unrealized gains, the short position has dropped to 8%, while the long position remains at a high of 285%. Therefore, the impact of long position selling on the market is crucial. Observing the selling situation of both long and short positions, we found that in the latter half of the week, the scale of long position selling had already dropped to an extremely low level, and short positions also reduced their purchases simultaneously. The optimistic news is that the BTC inventory on centralized exchanges continues to show an outflow trend.
Based on market structure information, we assess that the cryptocurrency market has largely completed its reaction to the Federal Reserve's shift in interest rate expectations. Accompanied by price adjustments, selling has returned to a subdued state, and future price movements will depend more on the warming trading sentiment in US stocks, as well as the allocation scale of mainstream US funds and institutions for BTC and ETH.
Cyclical indicators
According to the eMerge engine, the EMC BTC Cycle Metrics indicator is at 0.75, indicating that the market is in an upward phase.
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