The market, project, currency, and other information, opinions, and judgments mentioned in this report are for reference only and do not constitute any investment advice.
Written by: Shang2046
This week, BTC opened at $104,445.15 and closed at $95,087.75, hitting a historical high of $108,388.88 on December 17. Ultimately, this week recorded a decline of 8.96%, with a fluctuation of 15.58%. Trading volume has slightly increased but remains at the same level as the previous two weeks.
This week marks the first weekly market correction after BTC rose 38% in November. The core factor remains profit-takers cashing in. In this cycle, whenever the profit margin for short-term investors reaches over 30%, the probability of a correction quickly increases until their selling profit margin decreases or ongoing purchase costs become too high, at which point the market begins to evolve to the next phase.
At the same time, external changes have also supported the adjustment, which is the main force supporting BTC's adoption rate in this round: the Federal Reserve's rate cut, the Trump effect, and MicroStrategy's BTC buying have passed the initial strong phase and entered a holiday break period. Coupled with factors such as the Christmas holidays, which have a significant impact on BTC ETF, the adjustment of BTC is also expected.
It should be noted that the above factors are not short-term forces; in the long term, they will support the long-term development of BTC. For example, MicroStrategy will officially enter the Nasdaq 100 index on December 23, opening the door for mainstream U.S. funds to passively allocate BTC.
In the past week, fund inflows have shown a significant slowdown and may continue for 1-2 months. Correspondingly, the scale of selling by both long-term and short-term investors has also begun to noticeably slow down, returning to levels prior to this round of upward movement. Under this balance, the probability of the market being in a fluctuating trend has increased.
During this period, if the funding maintains a relatively net inflow state and the cost for short-term investors rises further to above $90,000, the next wave of major upward momentum will be further opened.
The relative support level for this adjustment is likely around $85,000—the cost line for short-term investors, which is currently in a state of gradual elevation.
Macroeconomic and Financial Data
On December 18, the Federal Reserve cut the federal funds rate target range by 25 basis points for the third time, to between 4.25% and 4.50%. Unlike this widely anticipated rate cut, Federal Reserve Chairman Powell made a hawkish speech that exceeded expectations.
Powell has clearly stated that the timeline for controlling inflation is not as expected, and various indicators of the U.S. economy are performing strongly. Coupled with predictions about the impact of Trump’s policies, the Federal Reserve maintains a very cautious attitude towards the pace of rate cuts next year. The market interprets this as a clear statement regarding a slowdown in rate cuts in 2025, with expectations for next year's rate cuts reduced from more than three times to below two times.
The Dow Jones has fallen for three consecutive weeks since hitting a new high in early December, down 2.25% this week; the Nasdaq has recorded its first weekly decline of 1.78% after rising for four consecutive weeks to new highs. The Russell 2000, which is more correlated with BTC, fell 4.5% this week.
The U.S. dollar index rose by 1.23% to 108.26 on the day of the rate cut, followed by a correction to 107.71 in the following days. London spot gold remained stable above 2600, with prices stable.
Funding and Supply Analysis
This week, funds continued to flow in at $1.202 billion, a significant slowdown compared to last week's $6.7 billion. Among them, there has been continuous net inflow within four days since December 19, with BTC ETF seeing a net outflow of $670 million on the same day, which overall diluted the inflow from the previous days.
On the supply side, in the past month, alongside the rapid increase in BTC prices, the average daily number of BTC transferred to exchanges by long-term and short-term investors has risen from 30,000 coins per day to 40,000-45,000 coins per day. In the past week, this number has gradually fallen back to the level of 30,000 coins.
The BTC inventory in exchanges continues to decline to 2,784,300 coins, down 16,000 coins from last week. This shows that the trend of chip accumulation is still continuing.
The cost line for short-term investors is $85,700, with profits dropping from 33% to 13%.
In terms of leverage, borrowing rates have fallen from a peak of 40% in the previous two weeks to around 10% and remain stable. Contract funding rates have also dropped from a peak of 99% to around 9%. Both indicate a rapid decline in market leverage.
Ecological Analysis
The number of new and active BTC addresses has remained basically stable, but the scale of value transfer has significantly declined.
The number of new and active addresses in the Ethereum ecosystem has seen slight growth. Other active platforms such as Solana, Base, and Polygon maintain strong vitality, with significant increases in new addresses, active addresses, and transactions.
Cycle Indicators
The EMC BTC Cycle Metrics indicator is 0.75, and the market is in an upward phase.
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