In the past two days, the price of Bitcoin has experienced a sharp decline, raising concerns in the cryptocurrency investment community. Below are some key reasons for this decline:
1. Statement from the Federal Reserve: On December 18, 2024, Fed Chairman Jerome Powell stated that the agency is not allowed to own Bitcoin and has no intention of changing the law to do so. This statement has lowered investors' expectations that the Fed will accumulate Bitcoin, leading to negative sentiment in the market.
2. Fed's cautious monetary policy: The Fed has lowered interest rates by an additional 0.25%, while signaling a slowdown in the pace of monetary easing in 2025, only planning to cut rates twice, each by 25 basis points. This has raised concerns among investors about liquidity in the market being tightened, negatively impacting risk assets like Bitcoin.
3. Wave of sell-offs and liquidation of contracts: The combination of the above factors has led to a wave of Bitcoin sell-offs. Within 24 hours, nearly $1.2 billion in cryptocurrency derivative trades were liquidated on exchanges, of which over $1 billion were long positions. This liquidation has created strong downward pressure on the market.
4. Market sentiment and investor reactions: The statements and policies from the Fed have shaken investors' confidence in the bullish outlook for Bitcoin. Many investors have decided to take profits or cut losses, resulting in increased selling pressure and a continued decline in Bitcoin prices.
The combination of the above factors has led to a significant decrease in Bitcoin's price over the past two days. Investors should closely monitor macroeconomic developments and monetary policy to make reasonable investment decisions in the coming period.
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