Dogecoin’s 11% Drop Leads Losses in Crypto Majors as Bitcoin Sours Festive Mood

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What to know:

  • Losses in BTC and other crypto majors extended to their third straight day.
  • Traders at Singapore-based QCP Capital attributed the market crash to overly bullish sentiment in the past month.
  • A drop in bitcoin comes amid an otherwise bullish period for the asset.

As an analyst with over two decades of market experience under my belt, I’ve seen bull markets turn bearish and bear markets turn bullish more times than I can count. The recent losses in BTC and other crypto majors are reminiscent of such market cycles, albeit with the unique twist that digital assets bring to the table.

In my analysis, the decline in Bitcoin (BTC) and other major cryptocurrencies has persisted for a third consecutive day. This downturn can be attributed to a risk-averse market atmosphere following this week’s Federal Open Market Committee (FOMC) meeting, as well as widespread profit-taking, which seems to have significantly influenced the overall market sentiment.

In my research analysis over the last 24 hours, I’ve observed a significant decline in the cryptocurrency market. Specifically, Bitcoin dipped by approximately 4.2%, while Solana’s SOL, Ether (ETH), and Cardano’s ADA followed suit with drops of up to 9%. However, it was Dogecoin that experienced the steepest decline, dropping by 11% – a fall that has escalated its weekly losses to surpass 21%.

The widely recognized CoinDesk 20 Index (CD20), which tracks the biggest cryptocurrencies by market capitalization, experienced a 5.5% decline. This drop extended to futures trading markets, resulting in approximately $890 million worth of both long and short positions being liquidated within the past 24 hours.

On Wednesday and Thursday, there was a significant drop in various risk assets as a response to a perceived hawkish stance by the Federal Open Market Committee (FOMC). The Nasdaq fell by 3.5%, the S&P 500 decreased by 2.9%, and Bitcoin experienced a decline of over 6% since the meeting where Fed chair Jerome Powell suggested that there would only be a limited number of interest rate cuts in 2025, which was seen as less accommodative than previously expected.

Later, during a press conference following the Federal Open Market Committee meeting, Powell stated that, due to existing regulations, the central bank does not have the ability to hold bitcoin – this being his reply to questions concerning President-elect Donald Trump’s pledges regarding a strategic bitcoin reserve.

Traders from QCP Capital in Singapore believe that excessive optimism in the past month was a significant factor leading to the recent market downturn.

Though some may attribute the recent drop in stocks to the Fed’s aggressive interest rate reduction being seen as hawkish, our analysis suggests that the main factor behind this morning’s market downturn is an excessive optimism among investors,” was stated in a broadcast on Telegram by QCP.

Following the election, risky investments have experienced a strong, unidirectional surge, making the market particularly susceptible to unexpected jolts. Although the Federal Reserve’s 25 basis point reduction was anticipated, the cause for anxiety stems from the updated dot plot, which was revised downward. This is because the Fed now anticipates only two interest rate cuts in 2025, contrasting with the market’s prediction of three cuts, as mentioned by QCP.

A drop in bitcoin comes amid an otherwise bullish period for the asset.

Bitcoin historically experiences a positive trend during December, often referred to as the “Santa Claus Rally.” Over the past eight years, bitcoin has ended the year with gains in six instances since 2015, with these increases ranging from 8% to a significant 46%, as seen in the exceptional year of 2020.

Seasonality refers to the pattern observed in assets where they undergo regular and recurring changes throughout each calendar year. Although these patterns may appear random, there are several reasons behind them. For instance, the period from April to May often sees profit-taking activities, which can lead to decreases or drawdowns. On a positive note, November and December typically exhibit a bullish trend, suggesting increased demand as people prepare for the holiday season.

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2024-12-20 10:20