Matrixport Market Watch: BTC consolidates at the end of the year, crypto market awaits catalysts

After four consecutive weeks of upward trend, the price of BTC suddenly plummeted after reaching a historical high of $108,353 on the 17th, and quickly dropped to $92,232 within 3 days, with a maximum drop of 14.87%. Currently, as market sentiment gradually stabilizes, the price has repaired to around $94,000 and entered the consolidation stage. Currently, the support level for BTC price is around $92,000. At the same time, altcoins have suffered serious hemorrhage, and the prices of many tokens have even dropped to the prices before October, smoothing out the "Trump effect increase" brought about by Trump's election as President of the United States (the above data comes from Binance spot, 12 17:00 on March 10th).

Although market trading volume activity has decreased, BTC spot ETF trading volume remains strong, with an average of 4.4 billion US dollars per day, reflecting that market activity is still very high. Moreover, MicroStrategy has officially entered the Nasdaq 100 Index on December 23, which may open the door for mainstream funds in the United States to passively allocate BTC.

Market interpretation

On October 23, all three indicators of the US stock market rose, with the Dow rising to 70 points and the Nasdaq rising about 1%. Affected by the Christmas holiday, trading sentiment was dull on Monday. Micro Strategy, a "big BTC investor", was affected by BTC price fluctuations and its share price fell 8.8%. Affected by Powell's hawkish signal, U.S. stocks fluctuated violently. However, considering that the market has high expectations for the stimulus policies adopted by the new U.S. government after taking office, U.S. stocks may stabilize after short-term market fluctuations.

BTC enters the year-end consolidation phase, investors need to pay close attention to the trend and wait for key signals

Last week, BTC experienced year-end consolidation, falling from a historical high of $108,353 to a local low of $92,000, with the maximum drop of about 15%. The internal reason why BTC has experienced a market correction this time is mainly because the profit margin of short-term profit makers has reached more than 30% in this cycle, and some of them chose to settle for safety, resulting in a rapid increase in the probability of a correction. External factors are due to the Federal Reserve's interest rate cut, the Trump effect, MicroStrategy's purchase of BTC, etc. After the initial strong period, it entered the pre-holiday rest period. Coupled with factors such as the Christmas holiday, which has a greater impact on BTC ETFs, BTC has entered an adjustment stage.

The buying power game in the BTC sell-off wave, the price may move towards new highs amid shocks

The behavior of short-term and long-term holders has a significant impact on price movements. According to the latest data from EMC Labs' eMerge Engine, a total of 268,581 BTC were transferred to exchanges this week, of which 256,826 were contributed by short-term holders and 11,755 by long-term holders. It was the second-biggest selling week since November.

Nonetheless, the buying power of the market, especially funds through BTC ETFs, successfully absorbed this part of the selling pressure. According to eMerge Engine data, CEX’s BTC inventory decreased by 27,901 this week. In addition, the floating profit for short-term holders fell to 25% from the previous high of 33%, a level generally regarded as a neutral level in a bull market.

It is worth noting that the selling volume of decisive long-term holders has declined sequentially. This shows that the BTC price is expected to correct back to above $100,000 and is expected to gradually rise amid fluctuations.

MicroStrategy was officially included in the Nasdaq 100 and has increased its holdings of BTC for 7 consecutive weeks, helping the long-term development of BTC prices.

On December 23, MicroStrategy (MSTR.US) announced that it had purchased an additional $560 million in BTC at an average price close to BTC’s historical high, marking the seventh consecutive week of increasing its holdings of BTC. According to documents filed with the U.S. Securities and Exchange Commission, MicroStrategy purchased 5,262 BTC between December 16 and 22 at an average price of approximately $106,662, which was the smallest purchase amount in recent weeks.

During the same period, MSTR was included in the Nasdaq 100 Index on December 23. Passive funds like QQQ (Invesco QQQ Trust, an ETF issued by Invesco that tracks the Nasdaq 100 Index) will be forced to automatically purchase MSTR, which in turn will be able to use these funds to purchase more BTC.

The entire passive investment ecosystem of traditional finance will unconsciously buy more BTC because of MSTR’s inclusion in major indices, just like they don’t realize they own NVIDIA stock. Therefore, as long as MSTR continues to use these funds to purchase more BTC, BTC buying demand will continue to grow.

Macro dynamics

The Fed 's hawkish interest rate cut disturbs the market, and cryptocurrencies experience "Black Thursday"

On December 18, the Federal Reserve lowered the federal funds rate target range by 25 basis points for the third time to a range of 4.25% -4.50%. Powell made it clear that the time to control inflation is not as good as expected, and various data on the U.S. economy are strong. The Fed is very cautious about the pace of interest rate cuts next year. The market generally believes that the Federal Reserve will lower the market's interest rate cut expectations in 2025 and reduce interest rate cuts from more than three times to less than two times next year.

At the same time, Powell declared: "The Federal Reserve is not allowed to hold BTC and will not consider participating in the government's BTC reserve plan." The Fed's hawkish turn also curbed the speculative sentiment released by Trump in the crypto market.

Affected by the uncertainty of the Trump administration, U.S. consumer confidence fell in December for the first time since March.

According to data released by The Conference Board on Monday, the consumer confidence index fell to 104.7 in December, lower than market expectations of 113.2 and the mid-range level of the operating range over the past two years. Among them, the confidence index of consumers over 35 years old dropped.

Consumers are less optimistic about business conditions and their own income prospects. Indicators measuring expectations for the next six months and indicators measuring current conditions have declined, which may further affect market confidence in a soft landing for the U.S. economy.

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