In the past two days, the entire cryptocurrency market has really been fluctuating and dropping, with many people asking: 'What exactly happened?' In fact, there are a few main reasons for this, and it's not entirely due to significant problems with the market's fundamentals but rather a combination of several factors that led to this decline. Let's take a look at these three major reasons.
1. Powell's 'sharp cut'
First of all, let's talk about Federal Reserve Chairman Powell. His recent statements have been nothing short of 'a savior for bears.' He said that the Federal Reserve will not participate in any government plans to hoard large amounts of cryptocurrency. As soon as this statement came out, the entire market's sentiment instantly collapsed. People originally thought that the Federal Reserve intended to ease regulations, but this statement poured cold water over that idea. Investors began to panic, bears started to increase their positions, and a wave of selling surged, causing prices to plummet.
2. Hopes for an interest rate cut by the Federal Reserve have been dashed
Then there's the expectation of an interest rate cut by the Federal Reserve. Everyone originally hoped that a rate cut next year would bring some breathing room to the market. Low interest rates are generally good news for risk assets like cryptocurrencies—money becomes cheaper, and people are more willing to invest in high-risk assets. But now, Powell and the Federal Reserve's attitude is that: the pace of rate cuts will not be that fast. Investors see that liquidity may not be as loose, and market enthusiasm suddenly drops. Funds begin to flow out, and the cryptocurrency market naturally faces selling pressure.
3. Year-end 'fund reshuffling'
Moreover, the year-end is a time when everyone generally wraps up their activities. Every year around this time, institutional investors and big players tend to 'lock in' their profits and reduce some risks; after all, it's the end of the year, and no one wants to take too much risk. Additionally, since trading volume is usually low at the end of the year, any slight market fluctuation can easily trigger larger price movements due to the exit of big funds. This behavior of 'taking profits' is actually a market inertia, especially in a highly volatile market like cryptocurrencies, where the impact is even greater.
Let's summarize
Simply put, this decline was not caused by a single event collapsing the market but rather the result of several factors acting together: Powell's remarks gave the market a 'warning'; the dashed expectations of an interest rate cut led to a loss of confidence; and combined with year-end 'profit-taking,' the market's liquidity became less active, causing prices to naturally drop.
However, don't be too nervous; this doesn't mean that cryptocurrencies are heading into a bear market completely. There may still be some fluctuations in the short term, but this is a normal market adjustment. For investors, now is the time to avoid rushing to buy the dip or following the crowd blindly. Stay steady, don't use high leverage, manage your positions reasonably, and be patient until an opportunity arises.
