After four consecutive weeks of gains, the price of BTC sharply declined after reaching a historical high of $108,353 on the 17th, quickly dropping to $92,232 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. At present, the support level for BTC prices is around $92,000. Meanwhile, altcoins are experiencing severe losses, with many tokens' prices even dropping to levels before October, erasing the 'Trump effect increase' brought by Trump's election as U.S. president (the above data comes from Binance spot on December 10 at 17:00).
Although market trading volume activity has decreased, the trading volume of BTC spot ETFs remains strong, averaging $4.4 billion per day, 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, U.S. stock indices rose across the board, with the Dow Jones increasing by 70 points and the Nasdaq rising by about 1%. Due to the influence of the Christmas holiday break, trading sentiment was muted on Monday, with 'BTC whale' MicroStrategy's stock price dropping 8.8% due to BTC price fluctuations. The hawkish signals released by Powell caused significant volatility in the U.S. stock market. However, considering the market's high expectations for stimulus policies to be adopted by 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 watch the trends for key signals.
Last week, BTC experienced year-end consolidation, retreating from a historical high of $108,353 to a local low of $92,000, with a maximum drop of about 15%. The internal reason for this BTC market correction is mainly due to the profit margin of short-term profit-takers exceeding 30%, with some profit-takers opting 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 BTC purchases, which have passed the initial strong phase and entered a holiday rest period. Additionally, factors such as the Christmas holiday, which significantly impacts BTC ETF, have contributed to BTC entering an adjustment phase.
The buying power game amid the BTC sell-off wave may push prices towards new highs amid fluctuations.
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 buying power in the market, particularly through funds from BTC ETFs, has successfully absorbed this selling pressure. According to data from eMerge Engine, the BTC supply on CEX decreased by 27,901 this week. Additionally, the floating profit of short-term holders has decreased from a previous high of 33% to 25%, a level typically regarded as neutral in a bull market.
It is noteworthy that the sell-off volume of long-term holders, who have a decisive influence, has been declining continuously. This suggests that the price of BTC is expected to adjust to over $100,000 and is likely to gradually rise amid volatility.
MicroStrategy has officially been included in the Nasdaq 100 and has increased its BTC holdings for seven consecutive weeks, aiding 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 the historical high of BTC, marking the seventh consecutive week of BTC accumulation. According to documents submitted to the U.S. Securities and Exchange Commission, MicroStrategy purchased 5,262 BTC at an average price of approximately $106,662 between December 16 and 22, which is the lowest number of purchases in recent weeks.
During the same period, MSTR was included in the Nasdaq 100 index on December 23. Passive funds such as QQQ (Invesco QQQ Trust, an ETF tracking the Nasdaq 100 index issued by Invesco) will be forced to automatically purchase MSTR, which in turn will allow MSTR to use these funds to buy more BTC.
The entire passive investment ecosystem of traditional finance will inadvertently buy more BTC due to MSTR being included in major indices, just as they are unaware of their holdings in NVIDIA stock. Therefore, as long as MSTR continues to utilize these funds to purchase more BTC, the buying pressure for BTC will continue to grow.
Macroeconomic Dynamics
The Federal Reserve's hawkish rate cuts disturbed the market, and cryptocurrencies experienced a 'Black Thursday'.
On December 18, the Federal Reserve lowered the target range for the federal funds rate by 25 basis points for the third time, to between 4.25% and 4.50%. Powell clearly indicated that the timing for controlling inflation is not as expected, and various data on the U.S. economy are performing strongly, with the Federal Reserve taking a very cautious approach towards the pace of rate cuts next year. The market generally believes that by 2025, the Federal Reserve will lower market expectations for rate cuts, adjusting next year’s cuts from more than three times to below two times.
At the same time, Powell stated: 'The Federal Reserve does not allow holding BTC and does not consider participating in a government BTC reserve program.' The Federal Reserve's shift to a hawkish stance has also suppressed the speculative sentiment released by Trump in the cryptocurrency market.
Affected by the uncertainty of the Trump administration, the consumer confidence in the United States 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 range over the past two years. The confidence index among consumers aged over 35 has also declined.
Consumers' outlook on business conditions and their income prospects is not optimistic. Indicators measuring expectations for the next six months and those measuring current conditions have both declined, which may further affect the market's confidence in a soft landing for the U.S. economy.
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