In the past couple of days, the crypto market has really been nerve-wracking, with ups and downs, and many people are asking, "What’s going on?" In fact, it can be summarized into three main reasons causing the disturbance, and it’s not that there’s a major issue with the market’s fundamentals. Let’s have a good chat about these three reasons.
First, Powell's "cold water"
First, let’s talk about Federal Reserve Chairman Powell. His recent remarks were like pouring a bucket of cold water on the market. He stated that the Federal Reserve would not participate in any government plans to hoard cryptocurrencies, and as soon as this was said, the market immediately panicked. Everyone was originally hoping that the Federal Reserve would loosen regulations, but after he said that, investors’ spirits were dampened. Seeing an opportunity, short sellers began to increase their positions and sell off, leading to a natural price drop.
Second, the hope for rate cuts falling through
Let’s talk about the Federal Reserve's interest rate cut expectations again. Originally, everyone was hoping that an interest rate cut next year would provide some breathing room for the market, as low interest rates are good news for risky assets like cryptocurrencies. But now, Powell and the Federal Reserve's stance is that rate cuts won't come so soon, and investors, seeing that liquidity might not be so loose, immediately lost enthusiasm. As funds began to flow out, the cryptocurrency market naturally couldn’t withstand the pressure of selling.
Third, year-end "fund recovery"
Finally, year-end is also a common time for everyone to "wrap up". Institutional investors and large holders tend to "stash away" their profits to reduce risk. Additionally, with lower trading volumes at the end of the year, any slight market fluctuations may easily trigger larger price swings due to the exit of large funds. This behavior of "taking profits" has a more significant impact in a volatile market like cryptocurrencies.
To summarize
Overall, this wave of decline is not caused by a single event, but rather the result of multiple factors acting together. Powell's cold water remarks sent a warning to the market; the hope for rate cuts falling through has undermined confidence; combined with year-end fund recovery, the liquidity in the market is not as active, leading to a natural price drop.
However, everyone shouldn’t be too nervous, as this doesn’t mean that cryptocurrencies are going to completely decline. There might still be fluctuations in the short term, but this is a normal market adjustment. Investors should not rush to bottom fish or follow the trend blindly. Stay calm, avoid high leverage, manage positions wisely, and patiently wait for opportunities to strike.
The market has experienced a sharp decline, and next I will prepare some suitable coins for bottom fishing as a recovery plan, click on my avatar to follow me! Choices are more important than effort!
