The recent crypto market pullback can be attributed to several factors. One major reason is the hawkish rate-cut decision by the US Federal Reserve (Fed) on December 18, which led to a decline in risky assets like Bitcoin ¹. The Fed reduced the federal funds rate but signaled a slowdown in interest rate cuts in 2025, causing Bitcoin's price to drop below $95,000.
Another factor contributing to the pullback is the growing bearish divergence between the crypto market's price and the Relative Strength Index (RSI) ². This divergence indicates weakness in the prevailing uptrend, which could hint at a reversal ahead.
Additionally, the crypto market was overleveraged on the bullish side, primarily due to profit-taking and risk-off mode ahead of the Fed's decision ². This led to massive liquidations across the derivatives market, with over $1.68 billion in total liquidations.
It's also worth noting that Bitcoin's price had nearly doubled in value over two months without significant pullbacks, making a correction not entirely unexpected ³.