Good afternoon, friends. Yesterday, the Nasdaq index fell sharply, dragging down the cryptocurrency market. Affected by the sharp drop in US stocks, the price of Bitcoin fell back to around $96,000, and Ethereum also fell to around $3,300. This made many friends panic, but there are actually some reasons behind it.
Why did Bitcoin plummet?
The main reason is that the US economic data performed too well! The data released last night showed:
Employment data was better than expected: U.S. job openings increased by 259,000 to 8.098 million in November.
Inflation remains high: the services price index hit an 11-month high.
Economic activity increased: non-manufacturing PMI rose from 52.1 to 54.1.
These data show that the US economy is very resilient, but the problem is that inflationary pressure remains high, which has brought market expectations for the Fed's interest rate cut to a freezing point.
No hope for a rate cut: The market believes that there is more than a 95% chance that a rate cut will happen in January, let alone before July.
Market sentiment has deteriorated: It was previously expected that the Federal Reserve would cut interest rates 2-4 times in 2025, but this now seems unlikely.
What's next for Bitcoin?
The trend of Bitcoin depends mainly on two factors:
The Fed’s expectations for rate cuts: As the probability of rate cuts decreases, the market may continue to pull back; if expectations for rate cuts increase, Bitcoin may rebound.
Market policies: such as Trump-related policies, but they will have little impact in the short term.
At present, the price of Bitcoin is in a state of volatility. After the data was released last night, the probability of a rate cut in March dropped to about 40%, and the probability of a rate cut in May is about 50%.
Next, we should pay attention to the economic data and Federal Reserve meetings at the following time points:
1. Data from January 10 and 15
2. FOMC meeting on January 29
If these data and meetings convey a more hawkish message (low likelihood of rate cuts), Bitcoin could fall further below $91,500, and risks need to be noted.
When will the altcoins usher in the main upward trend?
Recently, everyone can feel that altcoins have been sucked blood by Bitcoin, and their performance is far worse than the overall market, and they have even fallen more severely. In fact, this situation has happened before. Every time Bitcoin "sucks blood", altcoins usually usher in a wave of market.
The current market is still in the recovery stage, and the rebound of altcoins is relatively limited. The reasons are as follows:
Bitcoin is a bloodsucking currency: all the funds are sucked away by Bitcoin.
Primary market diversion: AI projects have absorbed some funds.
Lack of new narratives: There are no new hot spots in the market.
The market correction is actually a kind of elimination of speculators, especially those with unstable mentality:
I can’t sell it when the price goes up, and I can’t bear it when the price goes down.
Don’t dare to buy at low prices, but chase the rise at high prices.
In the end, these people often sell at a loss during a pullback and chase highs during an upswing, entering a "vicious cycle."
Cryptocurrency trading requires patience and strategy, rather than just following the crowd. It is difficult for people without complete trading logic to survive in the market.
Now we have to wait for Ethereum to pull up before the sentiment of altcoins will be fully opened. So there is no need to panic now. The key is to make a good layout, hold the chips, and wait patiently for opportunities.
With the market situation like this, what should we do next?
If the market stops falling today, I plan to pay attention to the AI sector. The reason is simple:
Fast rebound: The AI sector has always performed rapidly.
Future trends: AI and meme sectors are equally popular and will be the main theme of the future market.
Recall that in the first half of 2024, the AI sector and the meme sector took turns to exert their strength, and the market was so lively that it was amazing. This time the market fell, it was a good opportunity to layout at a low position to avoid chasing high later.
In the next two days, I will observe the market trend and decide whether to make a move. If there are good bids, I will also post them. Winning with stability is always better than blind impulse!
For those who are more cautious, I personally believe that the platform coins of the leading exchanges are still relatively secure (not prone to large pullbacks). After all, the current valuation and growth potential are still very good.
At the same time, most of the leading coins also provide good opportunities to build positions after this pullback, such as UNI, LINK, AAVE in the DeFi sector.
For those who like excitement and want to make a small investment for a big gain, AI Agent and RWA are undoubtedly the direction with higher odds. This is because the RWA sector has shown signs of accelerating after Trump's victory.
First, the appointment of Sacks, the White House's crypto chief, has provided strong support for asset tokenization. Second, institutions such as BlackRock, Franklin Templeton, Tether, and Visa have all entered the asset tokenization market, a move that has undoubtedly provided huge liquidity for the RWA real asset sector.