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After a markedly bearish day on December 19, the Cryptocurrency market continues its decline today, December 20.
The top three cryptocurrencies by market capitalization, BTC, ETH, and What is causing this drop? Is it the end of the bull cycle?
1. The Federal Reserve and its impact on the market
The beginning of the decline in the crypto market occurred after the announcement by the Federal Reserve (Fed) on December 18. According to the statement, only two interest rate reductions are projected for 2025.
With rates still high, markets considered high risk, such as cryptocurrencies, tend to attract less capital. This decision generated pessimism among investors, who expected greater monetary stimuli.
Importantly, the latest 25 basis point reduction left the Fed rates in a range of 4.25%-4.50%, which remains restrictive for liquidity.
2. A technical correction after a bullish streak
The current decline can also be interpreted as a technical correction after almost a month and a half of continuous increases.
The rally that propelled Bitcoin and other cryptocurrencies to new all-time highs began on November 5, coinciding with election results that favored Donald Trump.
However, after reaching these peaks, prices have begun to adjust. This phenomenon is not unusual and usually occurs after prolonged upward movements.
3. Unrealistic expectations surrounding Donald Trump
Arthur Hayes, former CEO of BitMEX, recently warned of a possible significant pullback in January, coinciding with Trump’s inauguration.
Although many investors expect the Trump administration to adopt a pro-crypto approach, including the creation of a national Bitcoin reserve, Hayes notes that these expectations could be unrealistic due to political constraints and the time needed to implement such measures.
If this hypothesis is confirmed, the market could remain under pressure in the absence of solid catalysts.
4. Bitcoin hits 24-day lows
Bitcoin has seen a significant drop, hitting a low of $92,281, marking its lowest level in 24 days.
Since its recent all-time high, BTC has retraced more than 10% and could be heading towards the $88,000-$90,000 area.
Additionally, Bitcoin ETFs recorded record outflows of $671.9 million on December 19, contributing to bearish pressure on the market.
A sustained recovery above $97,000 could strengthen current levels, while breaking above $100,000 would be a positive catalyst for altcoins.
5. Technical analysis of total market capitalization
The total market capitalization has fallen from 3.79 trillion on December 17 to 3.13 trillion on December 20, equivalent to a loss of $660 billion in just three days.
Total crypto market capitalization. Source: CoinmarketCap.
The yearly chart reveals a correction with possible support at 3.17 trillion, followed by a second level around 3 trillion. Furthermore, the technical pattern known as “rising megaphone” suggests high volatility and the possibility of an uptrend reversal if supports do not hold.
Conclusion: Is it the end of the bull cycle?
Although it is premature to say that the bullish cycle has ended, the factors analyzed indicate that the market could enter a phase of consolidation or neutrality in the short term.
The Fed’s decisions in 2025, the implementation of Trump’s promised pro-crypto policies and the behavior of inflation will be important elements in determining the next direction of the market.
In this scenario, investors should keep an eye on key supports on the charts and consider macroeconomic projections for the coming year.
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