Key Insights

• Bitcoin (BTC) and major cryptocurrencies have faced three consecutive days of losses.
• Market analysts from Singapore's QCP Capital believe the downturn is due to excessively bullish sentiment in previous weeks.
• Bitcoin's recent drop comes amid a generally positive trend for the asset.

Market Overview

Market sentiment has turned notably negative following the recent Federal Open Market Committee (FOMC) meeting, leading to substantial profit-taking across risk assets. BTC recorded a 4.2% decline over the last 24 hours, with notable drops in Solana (SOL), Ether (ETH), and Cardano (ADA) as well, while Dogecoin (DOGE) has seen the largest decline at 11%, which extends its weekly losses to over 21%.

Broader Impact

The broader index, the CoinDesk 20 (CD20), a collection of the top cryptocurrencies by market capitalization, collapsed 5.5%. In the past 24 hours, futures markets experienced over $890 million in liquidations.

Economic Factors

A hawkish viewpoint from the Fed has spurred intense selling pressure on Wednesday and Thursday, further exacerbated by Microsoft’s stock drop and the reaction within the Nasdaq, which fell by 3.5%. During discussions, Fed Chair Jerome Powell indicated expectations for just a couple of rate cuts in 2025.

Quote from QCP: "We believe the main cause of the morning’s crash is the market’s excessively bullish stance."

Translation: "Creemos que la causa principal de la caída de la mañana es la postura excesivamente alcista del mercado."

Given the election outcomes, risk assets have gained significantly, rendering the market susceptible to shock waves. Powell's post-FOMC remarks indicated that the Fed could not hold Bitcoin due to existing regulations, responding to inquiries related to President-elect Trump's potential strategic reserve commitments.

Seasonal Patterns

December traditionally marks a strong performance period for Bitcoin, often referred to as the "Santa Claus Rally." Historical analysis from the last eight years reveals that Bitcoin has concluded December positively six times since 2015, recording increases of at least 8% to a maximum of 46% in 2020.