Losses in bitcoin (BTC) and other crypto majors extended to their third straight day, as risk-off behavior after this week’s FOMC meeting and general profit-taking contributed to heavy sentiment in the market.
BTC is down 4.2% in the past 24 hours, with SOL, ether (ETH) and Cardano’s Solana falling as much as 9%. Dogecoin had the biggest slide with an 11% drop, extending the weekly losses to more than 21%.
The broad based CoinDesk 20 (CD20)an index of the largest tokens by market cap, fell 5.5%. That spread in the futures markets, with over $890 million in long and short liquidation in the last 24 hours.
The reaction to a hawkish FOMC triggered a sharp selloff in all risk assets on Wednesday and Thursday. The Nasdaq has fallen 3.5%, the S&P 500 is down 2.9% and BTC is down more than 6% since the meeting, where Fed chair Jerome Powell hinted at only a few rate cuts in 2025 .
Powell then said at a post-FOMC press conference that the central bank is not allowed to own bitcoin under current regulations — in response to a question about President-elect Donald Trump’s strategic reserve pledges. Trump.
Traders at Singapore-based QCP Capital attributed the market crash to last month’s overly bullish sentiment.
“While it’s easy to blame the selloff on the Fed’s hawkish cut, we believe the root cause of the morning crash is the market’s overly bullish positioning,” QCP said in a Telegram broadcast.
“Since the election, risk assets have enjoyed a remarkable one-sided run, leaving the market extremely vulnerable to any shocks. While the Fed’s 25bps cut is expected, the source of the panic is can be attributed to the dot plot, which has been revised lower. Given continued inflation, the Fed now projects two rate cuts for 2025 compared to the market consensus of 3 rate cuts,” added QCP.
Bitcoin’s decline comes amid a bullish period for the asset.
It tends to be December historically bullish for bitcoin in a move colloquially called the “Santa Claus Rally.” Data from the past eight years shows that bitcoin has ended December in the green six times since 2015, running from at least 8% to as much as 46% (in the outlier year of 2020).
Seasonality is the tendency of assets to experience regular and predictable changes that repeat each calendar year. While it may seem random, the possible reasons range from profit-taking during the tax season in April and May, causing drawdowns, to a generally bullish November and December, a sign of increased demand ahead of the holidays season.
