On the last day of 2024, Bitcoin briefly plummeted to $92,000, with a total liquidation of $277 million across the network in the past 24 hours, including $185 million in long liquidations and $92.16 million in short liquidations. Meanwhile, as US stocks opened, crypto-related stocks and the 'Big Seven' in US stocks all fell, with the Dow Jones down 1.04%, the S&P 500 down 1.13%, and the Nasdaq down 1.33%.
Since the onset of the Christmas market in late December, Bitcoin has experienced multiple short-term crashes. Below are the market reasons for Bitcoin's decline as summarized by BlockBeats, for reference only.
The strengthening dollar makes US stocks and the crypto market less appealing.
According to Bank of America data, approximately $35 billion flowed out of the US stock market over the past week, the highest weekly outflow since December 2022. Additionally, Goldman Sachs' trading division estimates that given the trends in stocks and bonds, US pensions will sell $21 billion worth of US stocks and purchase an equivalent amount of bonds by the end of December this year.
Last Friday, the yield on the 10-year US Treasury bond rose nearly 1%, reaching 4.629%, close to a seven-month high, and the US stock market may face risks of a frantic sell-off. Wall Street analysts believe that in the absence of major news, data, and with thin trading, the 10-year Treasury yield, as an anchor for asset pricing, will impact the stock market—the higher the yield, the greater the pressure on stocks.
The strengthening of the US dollar has pressured global currencies and assets, including Bitcoin. When the dollar strengthens, dollar-denominated assets become more attractive compared to cryptocurrencies. Investors prefer traditional investments such as US Treasury bonds or stocks, which yield returns in a strong dollar environment. Meanwhile, reduced liquidity and year-end profit-taking by investors further diminish the likelihood of sustained cryptocurrency price increases.
Net outflow of Bitcoin spot ETF.
The net inflow status of Bitcoin spot ETF data has shifted from the Trump-era to a net outflow, with a cumulative net outflow of $377.6 million last week, and a net outflow state on the previous day. On December 27, Fidelity's FBTC had a net outflow of $208 million, setting a record for the highest single-day net outflow.
Options expiration, quarterly end volatility sell-off
On December 17, QCP noted that the options market had issued some cautious signals; even as spot prices continued to hit new highs, the options market still exhibited a persistent bias towards put options relative to call options—perhaps reflecting that investors are more inclined to hedge risks rather than actively chase upward trends.
On December 28, options worth nearly $20 billion in nominal value for BTC and ETH will expire, accounting for almost half of Deribit's total open interest. At the same time, Bitcoin's price fell from $97,000 to $94,000 that day. QCP believes this is a typical quarterly end volatility sell-off, especially considering ongoing fluctuations in the spot market and that options sellers continue to close positions.
Greeks.live analyst Adam also posted on social media that the differences in options skew across maturities have widened. Since the bull market at the end of the year, the skew across maturities has been very close, fluctuating around 5%, with most differences not exceeding 1%. However, as adjustments have recently occurred, the differences have begun to widen, with short-term skew decreasing significantly. These data indicate a noticeable decline in market enthusiasm, and options market participants' optimism for January has weakened.
Stablecoin minting volume has fallen, and USDT FUD is impacting market confidence.
Since December, the minting volume of stablecoins has significantly decreased. On the 13th alone, Tether minted 1 billion USDT on Ethereum, with USDC's minting volume in December only at 200 million. However, since November 6, Tether has minted 21 billion USDT on Ethereum and Tron blockchains.
Today, the EU's MiCA legislation officially took effect, but Tether's USDT has not yet obtained compliance certification, raising concerns about its future in the EU market. MiCA imposes strict requirements on stablecoin issuers, and major stablecoins like Tether face capital reserve and liquidity requirements, which may lead to their exit from the EU market. Some EU trading platforms have already begun to take measures to comply with the new regulations, with Coinbase Europe having delisted USDT and other stablecoins.
Nevertheless, Tether's massive market capitalization and global adoption make it unlikely to suffer immediate financial shocks. Tether's CEO, Paolo Ardoino, posted on social media, 'Don't believe the FUD. Competitors are eager to convince you of things that aren't true. USDT is safe.'
It is worth noting that Tether itself has not encountered any financial problems or engaged in any illegal activities. Tether will focus on supporting new stablecoin projects, such as the launch of stablecoins EURQ and USDQ that comply with MiCA standards. However, given the historical collapses of stablecoins in the previous cycle, short-term USDT FUD will still affect market confidence.
