Bitcoin recently hit an all-time high, but has since fallen 9%, with other cryptocurrencies also suffering significant losses. The downturn in the crypto market led to the liquidation of over 304,930 traders and the loss of USD 1.02 billion in market value. Despite the recent selloff, analysts believe the setback is temporary and insist on the strength of the ongoing bull market. They suggest that the U.S.'s internal dynamics and pro-crypto leadership outweigh the negative effects of recent federal monetary policy.
Bitcoin and the company are on a downward trend that began two days ago when the No. 1 cryptocurrency hit a new all-time high of US$108,268 (A$173,651). Since then, BTC has fallen by around 9%, and in the last 24 hours alone it has fallen by 3%. At the time of writing, Bitcoin is trading at US$97,482 (AU$156,409), CoinMarketCap data shows.
Bitcoin (BTC), weekly chart, source: CoinMarketCap
The decline was even more pronounced for other cryptocurrencies, including Ethereum (ETH), which fell 6% in the past day, and Dogecoin (DOGE), which plunged about 13%.
Market price drops as traders are liquidated due to the crash
The crash wiped out US$1.02 billion (A$1.63 billion) from the cryptocurrency market and liquidated 304,930 traders, according to data from Coinglass.
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Long positions of US$856.67 million (A$1.37 billion) were liquidated, resulting in long positions of US$188.85 million (A$302.98) and short positions of US$57.26 million (A$9,1.87). A total of USD 246.11 million in Bitcoin liquidations occurred, including:
Liquidation Heatmap, Source: Coinglass
The carnage caused the global cryptocurrency market capitalization, which currently stands at US$3.36 trillion (A$5.39 trillion), to fall by 3.55%.
The crash followed a bull market that lasted since Donald Trump won the US presidential election in November 2024. It is very likely that Fed Chairman Jerome Powell's announcement yesterday contributed to the decline.
The US Federal Reserve has cut interest rates, but it is likely to only do so twice next year. Chairman Powell also stated that the Fed is not in a position to hold Bitcoin as a reserve asset. Many observers have high hopes that President Trump will establish a strategic Bitcoin reserve from day one.
Analysts say multi-year bull market continues
Matt Hogan, Bitwise's chief investment officer, doesn't think the recent selloff will change his bullish view.
He said that while the Fed's announcement is certainly “bad for risk assets,” Hogan believes the latest rate cut is just “a problem.”
According to the CIO, the Fed doesn't have the same influence over cryptocurrencies as it did in the past, and the “internal momentum” of cryptocurrencies is now much more important.
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So the bullish story for crypto continues, with crypto advocacy leadership in the US, institutional adoption through exchange-traded funds (ETFs), government purchases of Bitcoin, and advances in blockchain technology.
6/ So is this a hiccup or a reversal?I think it's a hiccup.
The Fed is less relevant to cryptocurrencies than it used to be. Cryptocurrencies currently have internal momentum, and today's announcement does nothing to thwart the megatrend.
1) Reversal of support for cryptocurrencies in Washington…
— Matt Hougan (@Matt_Hougan) December 19, 2024
Ultimately, Hogan said without worrying about the Fed, cryptocurrencies are in a “multi-year bull market.” He also shared technical indicators that suggest a continuation of the bull market.
Bitcoin’s 10-day exponential moving average (~$102,000) remains above its 20-day exponential moving average (~$99,000).
Matt Hogan, Bitwise CIO
