After four consecutive weeks of increases, the BTC price plummeted from a historic high of $108,353 reached on the 17th to $92,232 in a rapid decline within three days, with a maximum drop of 14.87%. Currently, as market sentiment gradually stabilizes, the price has recovered to around $94,000, entering a consolidation phase. The current support level for BTC price is around $92,000. Meanwhile, altcoins are experiencing severe losses, with many token prices even dropping to levels seen before October, erasing the 'Trump effect' gains following Trump's election as U.S. president (data sourced from Binance spot, December 10, 17:00).
Although market trading volume activity has decreased, the trading volume of BTC spot ETFs remains strong, averaging $4.4 billion daily, reflecting that market activity is still very high. Moreover, on December 23, MicroStrategy officially entered the Nasdaq 100 Index, which may open the door for mainstream U.S. funds to passively allocate BTC.
Market Interpretation
On October 23, all three major U.S. stock indices rose, with the Dow Jones up 70 points and the Nasdaq up about 1%. Due to the Christmas holiday market closure, trading sentiment was muted on Monday, with 'BTC whale' MicroStrategy's stock price dropping 8.8% in response to BTC price fluctuations. The hawkish signals released by Powell have caused significant volatility in U.S. stocks. However, considering the market's high expectations for stimulus policies from the new U.S. government, U.S. stocks may stabilize after short-term fluctuations.
BTC has entered the year-end consolidation phase, and investors need to closely monitor the trends for key signals.
Last week, BTC underwent year-end consolidation, falling from a historical high of $108,353 to a local low of $92,000, with a maximum decline of about 15%. The internal reason for this BTC market correction is primarily that short-term profit-takers have achieved a profit margin of over 30%, with some choosing to cash out, leading to an increased probability of correction. External factors include the Federal Reserve's interest rate cuts, the Trump effect, and MicroStrategy's purchase of BTC, which have all passed the initial strong phase and entered a pre-holiday resting period. Additionally, factors such as the Christmas holiday, which significantly impacts BTC ETF, have collectively led BTC into a correction phase.
The buying power game amidst the BTC sell-off may lead the price to new highs amidst volatility.
The behavior of short-term and long-term holders has had a significant impact on price trends. According to the latest data from eMerge Engine under EMC Labs, a total of 268,581 BTC were transferred to exchanges this week, with short-term holders contributing 256,826 BTC and long-term holders contributing 11,755 BTC. This marks the second-largest sell-off week since November.
Nevertheless, the market's buying power, especially through funds from BTC ETFs, has successfully absorbed this selling pressure. According to eMerge Engine data, the BTC inventory in CEX decreased by 27,901 this week. Additionally, the floating profit of short-term holders has dropped from a previous high of 33% to 25%, a level typically considered neutral in a bull market.
Notably, the selling volume of long-term holders, who have a decisive influence, has been declining continuously. This suggests that the BTC price is expected to correct to above $100,000 and is likely to gradually rise amidst volatility.
MicroStrategy has officially been included in the Nasdaq 100 and has increased its BTC holdings for seven consecutive weeks, supporting the long-term development of BTC prices.
On December 23, MicroStrategy (MSTR.US) announced an additional purchase of $560 million in BTC at an average price close to BTC's historical high. This marks the seventh consecutive week of increasing BTC holdings. According to filings submitted to the U.S. Securities and Exchange Commission, from December 16 to 22, MicroStrategy purchased 5,262 BTC at an average price of approximately $106,662, which is the lowest number of purchases in recent weeks.
At the same time, MSTR was included in the Nasdaq 100 Index on December 23. Passive funds like QQQ (Invesco QQQ Trust, an ETF tracking the Nasdaq 100 Index) will be forced to automatically purchase MSTR, which in turn can use these funds to buy more BTC.
The entire passive investment ecosystem within traditional finance will unconsciously purchase more BTC as MSTR is incorporated into major indices, just as they are unaware of holding NVIDIA stocks. Therefore, as long as MSTR continues to use these funds to purchase more BTC, the buying pressure for BTC will keep increasing.
Macroeconomic Dynamics
The Federal Reserve's hawkish interest rate cuts have disturbed the market, and cryptocurrencies experienced 'Black Thursday'.
On December 18, the Federal Reserve lowered the federal funds rate target range by 25 basis points for the third time, to between 4.25% and 4.50%. Powell clearly stated that the timing of inflation control is not as expected, and various economic indicators in the U.S. are performing strongly. The Federal Reserve has a very cautious attitude toward the pace of interest rate cuts next year. The market generally believes that the Federal Reserve will lower market interest rate cut expectations in 2025, reducing next year's cuts from more than three times to fewer than two.
At the same time, Powell stated: "The Federal Reserve does not allow holding BTC and does not consider participating in government BTC reserve plans." The Federal Reserve's hawkish shift has also suppressed the speculative sentiment released by Trump in the crypto market.
Due to the uncertainty caused by the Trump administration, consumer confidence in the U.S. experienced its first decline since March in December.
According to data released by the World Large Enterprises Alliance on Monday, the consumer confidence index for December fell to 104.7, below the market expectation of 113.2, which is the median level of the operational range over the past two years. The confidence index for consumers aged 35 and above has declined.
Consumers are not very optimistic about business conditions and their income prospects. Indicators measuring expectations for the next six months and current conditions have both declined, which may further affect market confidence in a soft landing for the U.S. economy.
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