The value of Bitcoin and other major cryptocurrencies decreased for the third consecutive day due to a combination of factors such as risk-off behavior following this week’s Federal Open Market Committee (FOMC) meeting and general profit-taking leading to heavy market sentiment. Bitcoin dropped by 4.2% over the last 24 hours, while Solana’s SOL, Ethereum (ETH), and Cardano’s ADA fell as much as 9%.
Dogecoin experienced the steepest decline, dropping 11% and extending its weekly losses to over 21%. The broad-based CoinDesk 20 (CD20), an index of the largest tokens by market capitalization, decreased by 5.5%. This trend also spread to futures markets, with over $890 million in long and short liquidations occurring within the last 24 hours.
The reaction to a hawkish FOMC meeting triggered a significant sell-off across all risk assets, including Bitcoin, which has fallen more than 6% since the meeting. In a post-FOMC press conference, Federal Reserve Chairman Jerome Powell stated that the central bank wasn’t allowed to own Bitcoin under current regulations, responding to a question about President-elect Donald Trump’s strategic reserve promises.
Traders at QCP Capital in Singapore attributed the market crash to excessively bullish sentiment in the past month, citing the market’s vulnerability due to its overly optimistic positioning. Despite this downturn, historical data shows that December tends to be bullish for Bitcoin, with the “Santa Claus Rally” occurring six times in the last eight years, resulting in gains ranging from 8% to 46% in 2020.
Seasonality, or the recurring and predictable changes experienced by assets throughout the year, could also play a role in these trends.
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