Cryptocurrency pullbacks may be caused by the following reasons:

Federal Reserve's hawkish statements and changes in interest rate expectations

In the December 2024 rate decision, the Federal Reserve lowered interest rates by 25 basis points, but Powell stated that there would only be two more rate cuts in 2025, which is far below market expectations. Additionally, the inflation forecast for 2025 was raised from 2.1% to 2.5%. Investors are reassessing the future liquidity environment, worrying that the room for interest rates to decline is limited and that rising inflation may lead to further tightening of monetary policy, thereby weakening the demand for safe-haven assets like Bitcoin.

Rising US Treasury yields

Data released by the Institute for Supply Management showed that the growth rate of the US services sector in December exceeded expectations. The rise in US Treasury yields typically puts pressure on growth-oriented risk assets, prompting investors to shift funds from risk assets to safer assets, resulting in a shock to the cryptocurrency market.

Uncertainty surrounding Trump’s policies

Previously, the market had high expectations for the Trump administration to relax regulations on cryptocurrencies and establish Bitcoin reserves. However, after the Federal Reserve's interest rate decision, investors became doubtful about the advancement of Trump's policies. Furthermore, although Trump stated that he wanted to classify Bitcoin as a national strategic reserve asset, these commitments have not yet materialized, leading investors to worry about policy uncertainty, which in turn triggered cautious sentiment and selling behavior in the market.

Spread of market panic sentiment

Since Bitcoin reached a historical high of $108,135 on December 17, 2024, the market experienced a certain degree of profit-taking and risk-averse sentiment. In the cryptocurrency market, once prices start to decline, panic selling often exacerbates the downward trend. Some investors, fearing further market declines, choose to exit hastily, resulting in a significant drop in cryptocurrency prices.

Intrinsic characteristics of the cryptocurrency market

When unfavorable factors appear in the market, it can easily trigger large-scale buying and selling behavior, leading to drastic price fluctuations. Furthermore, after experiencing a significant rise earlier, the cryptocurrency market itself also has a certain demand for pullbacks.

Citing the following technical aspects