Losses in the cryptocurrency market continued for the third consecutive day, as investors engaged in risk-off behavior following this week’s FOMC meeting. Bitcoin (BTC) experienced a 4.2% drop in the past 24 hours, while other major cryptocurrencies like Solana’s SOL, ether (ETH), and Cardano’s ADA also saw significant declines of up to 9%. Dogecoin took the biggest hit with an 11% drop, leading to weekly losses of over 21%.
The CoinDesk 20 (CD20), which tracks the largest tokens by market cap, fell by 5.5%, signaling a broad-based sell-off in the market. This negative sentiment spilled over to futures markets, with over $890 million in long and short liquidations occurring in the past 24 hours.
The sell-off was triggered by a hawkish tone from the FOMC during its meeting, causing a sharp decline in all risk assets. Major indices like the Nasdaq and S&P 500 also experienced significant losses, with Bitcoin falling over 6% since the meeting. Federal Reserve chair Jerome Powell’s comments about the central bank not being allowed to own Bitcoin under current regulations added to the downward pressure on the market.
According to traders at Singapore-based QCP Capital, the market crash was a result of overly bullish sentiment leading up to the FOMC meeting. The market’s one-sided rally since the election left it vulnerable to any negative news, and the Fed’s revised interest rate projections for 2025 caught investors off guard.
Despite the recent decline, Bitcoin has historically performed well in December, known as the “Santa Claus Rally.” Data from the past eight years shows that Bitcoin has ended December positively six times since 2015, with gains ranging from 8% to 46%. Seasonality plays a role in these movements, with factors like profit-taking in April and May and increased demand in November and December contributing to price fluctuations.
As investors navigate the volatile cryptocurrency market, it’s essential to stay informed about market trends and news that could impact prices. By understanding the factors driving price movements, investors can make more informed decisions about their cryptocurrency investments.