Due to the rise in U.S. Treasury yields and investors adjusting their expectations for the Federal Reserve's monetary policy, the U.S. Dollar Index (DXY) has reached new highs, and the cryptocurrency market has pulled back for the second consecutive day.
In the past 24 hours, BTC once fell to an intraday low of $92,600, and as of the time of writing, it has rebounded to around $94,400, still down 2.1% in the past 24 hours, while Ethereum dropped to around $3,330.
The minutes of the Federal Reserve meeting released today further indicate that officials are generally willing to maintain interest rates unchanged at the upcoming meeting at the end of this month. Consequently, the market adjusted its expectations for the Federal Reserve's future monetary policy, putting pressure on risk assets and leading to a decline.
Two consecutive days of pullback have led to the liquidation of cryptocurrency leveraged derivative positions worth nearly $1 billion, mainly from bullish positions betting on price increases.
The recent pullback in Bitcoin's price reflects the market's correction of its earlier optimistic expectations. The previous optimism was primarily based on two assumptions:
Firstly, the Federal Reserve will adopt a more accommodative monetary policy, specifically actively cutting interest rates.
Secondly, if Trump is re-elected as President of the United States, it is expected to bring a clearer regulatory framework for the cryptocurrency industry.
However, the current economic data and the Federal Reserve's statements have raised doubts about the extent to which the above two assumptions will be realized.
In the absence of new market narratives to drive growth, the cryptocurrency market is gradually returning to the logic of traditional financial markets. When interest rates are low, investors typically tend to increase their allocation to risk assets (such as cryptocurrencies and tech stocks) in search of higher returns. However, currently, due to the unclear cryptocurrency policy of the Trump administration, market sentiment is relatively cautious, and this uncertainty is expected to persist for some time.
In the short term, the price of Bitcoin may enter a period of intense fluctuations.
The article from the day before yesterday (Bitcoin is back at 100,000, when will the general rise start? When to enter and when to exit?) also clearly advised everyone not to chase the rise temporarily, to first see if 100,000 can stabilize before considering further action. Of course, the market has begun to fluctuate as expected.
What about altcoins? What can retail investors still buy?
The trading volume of altcoins has seen explosive growth in this round, and the growth rate far exceeds that of Bitcoin. Although the large-scale liquidation in December led to a nearly $10 billion drop in the open interest, the current open interest is still about 40% higher than the peak of the small bull market in March 2024. This reflects that altcoins remain the main direction for capital speculation.
Although the scale of altcoins has exceeded that of March 2024, even reaching the highest level in nearly three years, the peak value of the weighted average funding rate for this round of altcoin trading is still far below that of March 2024. This indicates that the bullish sentiment in the market remains in a moderately fermenting state.
Since the market share of Bitcoin has fallen back from its peak of 60%, the daily trading share of altcoins (excluding the top ten by market cap) has long maintained above 40%, remaining dominant. The reason for feeling that the altcoin market is sluggish is that the daily trading volume has sharply dropped from $300 billion to $150 billion, leading to a situation where there are more traders than good projects. In the context of reduced competition, capital is mainly breaking through in two directions: one is to concentrate on strongly trending coins such as SUI, AAVE, XRP, etc.; the other is to cluster around popular themes for speculation, such as AI Agent, DeSci, RWA, etc.
Since the market bottomed out on December 20, AI Agent has undoubtedly become the hottest topic in the market. Over half of the top gainers are related to AI Agent. The two star projects of AI Agent, Ai16z and Virtual, have also undoubtedly become one of the strongest tokens in terms of capital-raising ability for December 2024. As capital has deeply entered this field, the market for AI Agent is very likely to continue for several months. To achieve considerable excess returns, it is still necessary to keep up with market trends.
Of course, chasing the high on Ai16z and Virtual is clearly not the best choice for participating in AI Agent at the moment. Instead, for those who are more conservative, the second-tier projects that have already adjusted, such as ACT and GOAT, are more likely to give rise to trading opportunities.
In the operation of altcoins, opportunities mainly depend on individual risk preferences and profit expectations.
For more conservative partners, the platform tokens of top exchanges still have a high safety margin, as their current valuation and growth potential are still quite good. At the same time, the leaders in most subfields have also provided good entry opportunities during the pullback, such as UNI, LINK, AAVE, SSV in the DeFi sector.