Author: 1912212.eth, Foresight News
On December 17 last year, the cryptocurrency market showed a downward trend following Powell’s hawkish remarks. On Tuesday, official data showed that U.S. employment figures were better than expected and service sector inflation accelerated. These two data points quickly dampened market expectations for a Federal Reserve rate cut, with the market generally predicting that there could only be one rate cut this year. As a result, Bitcoin fell from over $100,000 to a low of $92,500, while Ethereum fell from $3,700 to a low of $3,208.
Altcoins have been largely affected, with some experiencing significant declines. Between January 7 and 8, some altcoins erased all gains since January 1. In the 24-hour decline, the DeFi sector saw USUAL fall by 11%, ENA by 6%, and PENDLE by 9%. Meme coins WIF and PEOPLE both fell more than 8%, while public Layer 2 chains like APT, TIA, and ADA saw a decline of around 5%. MOVE fell more than 9%. In the AI sector, VIRTUAL fell more than 6%. WLD and ARKM saw declines of around 5%.
Contract data shows that $556 million was liquidated in the past 24 hours, including $418 million of long positions liquidated, and the largest liquidation was $15.299 million.
Bitcoin spot ETF data has seen net inflow for three consecutive days since January 3, with net inflows exceeding $900 million on January 3 and 6. Data for the Ethereum spot ETF was poor, however, with sharp outflows on January 2 and 7. , while net collections were recorded on January 3 and 6, resulting in a slight net collection for the month. However, according to data from Trader T, on January 8, the US Bitcoin spot ETF recorded a net outflow of $569 million, and Ethereum recorded a net outflow of $159 million, which undoubtedly exacerbated the already illiquid market.
In terms of stable data, since January 1, the USDT market cap has declined but has started to recover, currently hovering around $137.5 billion.
USDC data, on the other hand, performed well, rising from $43.95 billion to a high of around $46 billion, with a net inflow of over $2 billion. USDC is primarily held by US users, which may indicate continued buying strength in US capital.
Why do market prices continually fall?
Silk Road’s $6.5 Billion Bitcoin Sale Approved
On the morning of January 9, an official confirmed to DB News that the US Department of Justice had been authorized to liquidate 69,370 BTC (worth approximately $6.5 billion) seized in the Silk case Road. The DOJ requested permission to sell these assets due to Bitcoin’s price volatility. Asked about next steps, a DOJ spokesperson said: “The government will take further action based on the judgment in this case.” »
Following this news, Bitcoin briefly fell more than 1%, but quickly rebounded to around $94,000.
Currently, the U.S. Department of Justice has not determined when to sell. Additionally, there are only 11 days left until Trump officially takes office, and he previously stated that he would not sell any Bitcoin after taking office.
According to the latest data from Arkham, US government addresses currently hold 198,109 Bitcoins, worth approximately $18.59 billion; they also hold 54,753 Ethereum, worth approximately $181.3 million.
Significantly lower expectations for Federal Reserve rate cuts
On the evening of January 8, ADP U.S. employment figures for December recorded 122,000, below market expectations of 140,000, marking the lowest level since August 2024. The number Initial claims for unemployment benefits for the week ending January 4 were recorded at 201,000, the lowest since the week of February 17 2024. These two data points further indicate the strength of the US market economy, leading to a further decline in rate cut expectations.
In the early hours of January 9, Federal Reserve meeting minutes indicated that committee members expected the pace of rate cuts to slow significantly in 2025, with only a 75 basis point cut expected for the whole year. Market futures prices suggest that the degree of policy easing in 2025 may be slightly lower than this expectation. Nevertheless, market participants still maintain considerable uncertainty about the direction of the federal funds rate over the next year.
In discussing inflation developments, participants noted that although inflation has slowed significantly from its 2022 peak, it remains elevated. They indicated that overall inflation rates would slow in 2024, with some recent monthly figures beating expectations. Despite this, most said progress in inflation remained evident across a wide range of prices for basic goods and services.
Federal Reserve Governor Waller said Wednesday that although inflation is expected to stagnate above the 2% target by the end of 2024, based on market expectations and data from inflation in the short term, the inflation situation in the United States continues to improve. He predicts that inflation will continue to fall in 2025, encouraging further rate cuts. Waller stressed that the fundamentals of the U.S. economy remain strong and the labor market shows no signs of significant weakness. There is considerable disagreement among Federal Reserve officials over the number of rate cuts in 2025, ranging from zero to five. He believes that despite calls for a slowdown or pause in rate cuts due to the slow rise in inflation, medium-term inflation will continue to advance towards the 2% target, which would make it appropriate further rate reductions.
According to CME FedWatch data, the probability that the Federal Reserve will maintain interest rates in January is 95.2%, while the probability of a 25 basis point cut is 4.8%. The probability of maintaining the current rate in March is 60.9%, with a cumulative probability of a 25 basis point cut to 37.3% and a cumulative probability of a 50 basis point cut to 1, 7%.
As the likelihood of a Federal Reserve rate cut diminishes, liquidity injections into the market slow and market prices struggle to rise. Consumer Price Index inflation data scheduled to be released on January 15 could lead to significant swings in the cryptocurrency market.
Future trends
The correlation between Bitcoin and the S&P 500 Index increased to 0.88, indicating synchronization between the two markets, marking a change from the previous divergence trend (since Trump’s election, Bitcoin has increased by 47 %, while the S&P 500 index only increased by 47%). of 4%).
Andre Dragosch, head of research at Bitwise Europe, attributes the re-emerging correlation to macroeconomic factors, including the Federal Reserve’s revised rate cut forecasts and the strengthening dollar, which continue to put pressure on both crypto- currencies and traditional markets. Although Bitcoin enjoys strong on-chain support, its price movements are increasingly influenced by broader market trends, indicating potential near-term risks.
Matrixport’s chart report suggests that fluctuations in global liquidity may put some pressure on Bitcoin, as historical data shows that liquidity changes typically drive Bitcoin’s price movements by around 13 weeks. With the dollar strengthening following Trump’s re-election, global liquidity measured in dollars has started to tighten, suggesting that Bitcoin may be entering a consolidation phase in the near term.
However, this consolidation should be a temporary phenomenon. Overall, risk assets (especially Bitcoin) still show positive long-term potential. Nonetheless, in a lower liquidity environment, traders should exercise greater caution, as these indicators have historically proven to be reliable market barometers.
Cauê Oliveira, head of research at Blocktrends, said today that the price of Bitcoin fell after hitting an all-time high in late 2024, when institutional investors sold a large amount of Bitcoin, but are now starting to sell again. buy Bitcoin at lower prices. $100,000.
Data shows that in the week following December 21, wallets holding 1,000-10,000 BTC sold 79,000 BTC, but after Bitcoin’s recent pullback, this group began to accumulate again when the price of Bitcoin fell below $95,000.
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