The Federal Reserve's fixed-rate reverse repo tool (RRP) usage has dropped to $98.356 billion, marking its first drop below $100 billion since April 2021; at the end of September 2022, it peaked at $2.426 trillion. The probability of the Federal Reserve maintaining interest rates in January next year is 91.4%, with a probability of 47.6% for maintaining rates in March, and a cumulative probability of 48.3% for a 25 basis point rate cut.
Returning to the main topic:
SEC commissioner Hester Peirce expressed optimism in an interview with Coinage about the possibility of revisiting two SEC decisions involving cryptocurrency ETFs: the potential for physical redemption and the staking of ETH ETFs is expected to be reconsidered. Peirce showed optimism about the likelihood of these changes under the new SEC management. Trump appointed former college football player and House candidate Bo Hines as the executive director of the Presidential Digital Asset Advisory Committee, which Trump referred to as the "Crypto Committee." Trump stated that in his new role, Bo Hines will be responsible for collaborating with David Sacks on crypto and AI to promote innovation and growth in the digital asset space while ensuring industry leaders have the resources needed for success. On December 23, the cryptocurrency fear and greed index fell to 70 (with a weekly average of 83), marking the lowest market sentiment since December. CoinGlass data shows a cumulative net outflow of 15,045.33 BTC from CEX in the past 7 days. According to Lookonchain data, in the past week, El Salvador increased its holdings by 29 BTC, reaching a total of 5,995 BTC. Matt Hougan, Chief Investment Officer of Bitwise Asset Management, attributed the recent pullback in the crypto market to "the natural cleansing of leverage," emphasizing that "long-term driving factors remain intact, and the market is still in a strong bull market."
Analyst Adam from Greekslive stated that this Wednesday is Christmas, and with the markets in Europe and America closed, crypto funds usually show outflows this week. This bull market has not yet seen significant pullbacks, and a deleveraging event before Trump's inauguration cannot be ruled out. Volatility expectations for this Christmas week are low, with the market betting more on the trends before and after Trump's inauguration at the end of January. Analysis of the performance of BTC during the Christmas and New Year holidays over the past five years shows that from December 20 to January 6, BTC has had significant amplitude, but actual gains and losses, except for 2020, have mostly been within 10%. In 80% of the years, the cryptocurrency price performance in the following two months has been quite good, and if the baseline period is narrowed to one week after New Year, the possibility of profit remains at 60%. The performance of the Nasdaq index over the past five years shows that while there has been significant fluctuation during Christmas, the overall gain and loss has been minor, suggesting that after the holiday, U.S. stocks will not have a significant negative impact on BTC. According to CoinGlass data, the Market Value to Realized Value (MVRV) indicator shows that its MVRV-Z score has dropped from last week's high of 3.3 to 2.84. Historically, an MVRV-Z score below 3.7 indicates that the asset is undervalued, and the MVRV calculation method is to subtract the realized market value from the circulating market value, then divide that number by the standard deviation. The last major adjustment in January 2021 had an MVRV-Z score of 7, suggesting that this score indicates BTC could have a strong recovery in the coming weeks. Last week, the cumulative net inflow of BTC spot ETF in the U.S. was $457.2 million; the cumulative net inflow of ETH spot ETF was $62.7 million.
MicroStrategy has increased its holdings of 5,262 BTC at an average price of approximately $106,662, worth about $561 million. As of December 22, 2024, MicroStrategy holds 444,262 BTC. CryptoQuant's CEO released data indicating that the combined BTC holdings of ETFs, European and American governments, and MicroStrategy now account for 31% of the known BTC holdings. Glassnode stated that as the crypto market grows, the magnitude of BTC pullbacks in the bull market is gradually decreasing. The deepest pullback in this cycle was -32% (on August 5, 2024), with most pullbacks only around 25% down from previous highs, reflecting increased demand for spot ETFs and rising institutional interest. Asset management company VanEck stated that if the U.S. establishes a reserve of 1 million BTC according to Senator Cynthia Lummis's proposal, by 2049, this reserve could account for 35% of the U.S. national debt, offsetting about $42 trillion in liabilities. The Federal Reserve's fixed-rate reverse repo tool (RRP) usage has dropped to $98.356 billion, marking its first drop below $100 billion since April 2021; at the end of September 2022, it peaked at $2.426 trillion. Barclays Bank expects the Federal Reserve to pause interest rate cuts after June next year and to resume cuts around mid-2026 after inflationary pressures subside, predicting two 25 basis point cuts in 2026, with a terminal rate of 3.25-3.50%. HSBC still expects the Fed to cut rates by 75 basis points (3 times) in 2025.
According to LSEG IBES data, S&P 500 index earnings are expected to grow by 14% in 2025, with investors showing greater confidence in the economy compared to a year ago. Wells Fargo global market strategist Sameer Samana stated that finishing 2024 on a good note suggests that a certain degree of re-acceleration will occur in 2025, as markets often lead the economy, so they will prepare early for economic re-acceleration. Paris-based asset management strategist Garrett Melson noted that 73% of institutional investors indicated they would avoid recession in 2025, and if the returns of the past two years are not reached, U.S. stock indices could still achieve about 10% robust growth in 2025. Analyst Keith Lerner remarked that the current bull market of the S&P 500 index, starting in October 2022, has lasted less than half the average duration of the previous 10 bull markets, with the S&P 500 index rising about 64%, below the median increase of 108% and the average increase of 184% seen in prior bull markets. The probability of the Federal Reserve maintaining interest rates in January next year is 91.4%, with a probability of 47.6% for maintaining rates in March, and a cumulative probability of 48.3% for a 25 basis point rate cut. Coinglass data shows that in the 11 historical "December" market cycles, BTC has seen 6 declines and 5 increases, possibly due to the first quarter typically being a time when asset management companies make annual capital allocations; in the past 5 years, 4 years have seen a bull market after Christmas.
This decline adjustment is mainly affected by the reduced expectations of interest rate cuts from the Federal Reserve, not a narrative of economic fundamentals weakening. Most Wall Street investment banks predict that stock indices will rise next year, with year-end targets for the S&P 500 index between 6,000 and 7,000 points, as this index recently hovered around 5,900 points. In the first quarter of 2021, BTC rose by 103.1%, and in the fourth quarter of 2020, BTC rose by 168%. Currently, in the fourth quarter of 2024, BTC has risen by 47.1%, while the rise in the first quarter of 2025 is unknown. As BTC's market capitalization increases, the magnitude of the rise decreases, and the bull market trend continues. In the first quarter of 2021, Musk (Tesla) pumped BTC, pushing the market bubble to the end of the year; in the first quarter of 2025, Trump will take office, with expectations of interest rate cuts from the Fed in both the first and second halves of the year (with expectations to stop balance sheet reduction in the first quarter), still representing the growth period of the bubble. After Christmas/New Year, investors in U.S. stock indices will return, traditionally rebalancing for the first quarter, and the crypto market is likely to see another peak, currently being in a valley of capital outflow before the holiday, waiting for the next peak.