Bitcoin dropped below $100,000 this week as the cryptocurrency market took a major hit. This shift is reflected by the Crypto Fear and Greed Index, which fell from an ‘extreme greed’ reading of 88 to 69. This sudden change has left many investors worried about the market. The most known reason for the decline is a serious concern.
On Dec. 19, Bitcoin traded around $102,300, and Ethereum decreased to $3,600. Tokens like Cosmos, Floki, THORChain, Curve DAO Token, Fantom, and dozens of others plunged among the biggest decliners.
The Federal Reserve’s recent monetary policy decision was a primary factor in the market’s downturn. On Dec. 18, the Fed cut interest rates by 0.25%, a total of 1% this year. Though this was expected, the Fed’s forward guidance battered markets. Officials said they expected two more rate cuts in 2025 and continued to call for a tight stance on inflation control. Projections suggest inflation could only reach the 2% target by 2026 or 2027.
The Federal Reserve’s hawkish tone reverberated across financial markets. The Dow Jones and Nasdaq 100 indices fell more than 2% in U.S. equities. The 10-year yielded 4.557%, and the 30 year yield rose to 4.7%, each posting multi-month highs. The U.S. Dollar Index surged to a two-year high, putting pressure on risk assets like crypto funds.
Following the Wyckoff Method, the crypto market declined due to profit-taking, panic selling, and mean reversion. Investors often sell to lock in gains after rallies, causing pullbacks. This ties to mean reversion, where assets return to their averages after a rise. For instance, if Solana’s price weakens and stays 20% above its 200-day average, it might face further drops. Yet, the future remains uncertain.
The Wyckoff Method describes four phases in an asset’s life: markup, distribution, accumulation, and markdown. Recently, cryptocurrency prices surged. The drop might indicate a shift to markdown or signal the end of the distribution phase.
