Bitcoin's recent drop from 108,000 to 100,000 is exactly the same as its drop from 98,000 to 90,000 last month. For such a cyclically strong asset like Bitcoin, large fluctuations are normal. As long as you can find the rationale behind each rise or fall, you can remain calm in the face of ups and downs. For me, isn't this something I just experienced last month? I also know what will happen next, it's not interesting!
Let's first talk about last night's drop. Even though the market is anxious and altcoins are scared, I really don't think it's a big deal. It's just a normal correction. If we set aside the several negative events from last night and compare it to the Bitcoin's rise from 90,000 to 100,000 starting November 21, you'll find that Bitcoin always experiences a major correction before reaching a big number.
I am not surprised by this drop at all because this is exactly what we just experienced last month. I am mentally prepared for the subsequent trends. Bitcoin has been in a fluctuating upward trend since November 27 and officially broke through the 100,000 mark in a week. This wave of events may not be completely identical, but it's quite similar. By next weekend, we will see Bitcoin above 110,000. If you don't believe it, you can take a screenshot now.
Now let's rationally analyze a few reasons for this drop:
(1) Hawkish remarks from the Federal Reserve.
Last night, although the Federal Reserve cut rates by 25 basis points as expected, the dot plot reduced the original expectation of 4 rate cuts next year to 2, and the 4 cuts in 2026 were also cut to 2. This is the most hawkish dot plot of the year. Powell's post-meeting remarks were also very hawkish, emphasizing a slower pace of rate cuts and concerns about a rebound in inflation. The most shocking was that Powell directly mentioned Bitcoin, stating, 'We are not allowed to hold Bitcoin.' This statement caused the market to crash.
Of course, it's not just the crypto market that has collapsed. Yesterday, the Dow Jones fell for ten consecutive days, creating the longest losing streak since 1974, with a decline of over a thousand points. The S&P dropped nearly 3%, marking the largest decline on a rate cut day since 2001, and the Nasdaq fell over 3%. In summary, the previous drop in US stocks dragged down the crypto market, and after Powell's specific mention, the crypto market fell again.
(2) MicroStrategy cannot purchase Bitcoin.
MicroStrategy announced last night that it will pause issuing convertible bonds to purchase Bitcoin in January. The reason is that January 2025 is the lock-up period for MSTR stocks. During this time, MicroStrategy cannot raise funds through on-market transactions (ATM) to buy Bitcoin. There are two interpretations of the specific time of this lock-up period: some say it's a full month, while others predict it starts on January 14 for 30 days. Currently, MicroStrategy has not officially responded to this rumor.
In any case, this news is definitely bearish for Bitcoin. In the recent waves of Bitcoin's rise, we have seen news of MicroStrategy's replenishment. The fund flow of ETFs is also influenced by MicroStrategy's buying. Last night, Bitcoin ETFs only saw an inflow of $275 million, which is half of this week's average level.
However, in the long run, Bitcoin's current drop is not a big deal!
Let's talk about Powell's bearish stance on Bitcoin. It is known that Trump is bullish, and now Trump's power is basically at its peak in the US. Powell's resignation is just a matter of one sentence; even if he isn't removed, Arthur Hayes believes that Trump can balance Powell through his nominated Treasury Secretary Scott Bessent. Overall, the recent market decline does seem a bit impulsive; rational thinking should distinguish between small and big players.
As for MicroStrategy's pause in increasing Bitcoin holdings in January, this is just temporary. In February and March, they will have to buy more. Moreover, under the condition of unchanged funding, the buying speed will increase later. Additionally, there will be $16 billion in FTX compensation entering the market in the first quarter of next year, plus various states' strategic reserve plans, which the Federal Reserve cannot control. The Fed is just a money-printing institution; the Treasury is the one that spends.
So the long-term upward trend of Bitcoin has not changed. This wave of correction is just to clean up leverage and then allow everyone to get on board.
That's all for today. During a bull market phase, many people hope for a strong leader. If you can't navigate the crypto space by yourself, don't force it. Come find me for the latest information, layout strategies, embrace the bull market, improve your win rate, and say goodbye to being trapped at high positions.
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