The crypto market is undergoing a period of major changes, marked by a drop in the prices of key assets and a decrease in overall market capitalization. In the past 24 hours, the market's capitalization decreased by $128 billion, now standing at $3.28 trillion.
Bitcoin's price has fallen below the critical $100,000 level, landing at $97,074 after reaching a record high of $108,384 earlier this week. Ethereum has also felt the sting of the market-wide decline, with its price dropping to $3,119 — a 20% loss over the past four days. Let’s consider the reasons behind the current situation and explore what we can expect in the future.
Total #crypto market cap is down 10% to $3.5T today, as #Bitcoin falls below $98K 🔴 pic.twitter.com/xw2HXOxV2K
— CoinGecko (@coingecko) December 19, 2024
Critical Support Levels Under Pressure
The total crypto market capitalization at $3.28 trillion serves as a crucial support level for the industry. Holding above this level is key to providing the necessary stability to prevent a deeper downturn. However, continued pressure could push the market down further to $3.10 trillion.
Bitcoin is holding its support at $95,668, reflecting buyer interest at lower levels. On the other hand, many investors are taking profits after recent price gains, adding extra downward pressure.
Analysts suggest that if current trends persist, Bitcoin may consolidate below $100,000. However, a breakout above this level could reignite bullish momentum. Popular trader Follis has noted that $120,000 is the breakout target if it happens.
$BTC repeating the December playbook from last year
— フ ォ リ ス (@follis_) December 19, 2024
Liquidate late longs → liquidate late shorts → pump to new highs
Imagine the smell pic.twitter.com/2xbiNTyy5B
Ethereum lost its key support at $3,500, triggering a cascade of liquidations and panic among traders. Over $299 million in long positions were closed, intensifying the sell-off.
Ether ETFs have also seen negative flows, indicating waning interest in the asset. According to SoSoValue, U.S. spot Ether ETFs experienced outflows of $60.47 million on December 19. The Grayscale ETHE fund, which experienced its first net inflow on December 12, was a major driver of the December 19 outflows, contributing $58.13 million to the total.
Federal Reserve Policies and Market Impacts
One of the main factors driving the recent downturn is the economic policy of the U.S. Federal Reserve (Fed). On December 18, the Fed lowered interest rates to a range of 4.25-4.5%, signaling a more aggressive stance moving forward.
According to the Financial Times, these measures are aimed at combating inflation but have also contributed to instability in the stock markets. Following declines in U.S. indices like the Dow Jones, S&P 500, and Nasdaq, the cryptocurrency market experienced a similar dip.
Despite these negative trends, the crypto market retains potential for recovery. Maintaining the current market capitalization level of $3.28 trillion could provide a foundation for stabilization. If buying activity returns, prices might recover to levels around $3.49 trillion.
For Bitcoin, stability at $95,668 offers hope for a swift rebound, particularly if it can break through the $100,000 barrier. Ethereum, meanwhile, faces a critical level at $3,000, with further declines possible if this support is breached.
Long-Term Outlook
In the long term, cryptocurrencies remain a vital asset class despite current volatility. However, factors like Fed policies, liquidation events, and waning institutional interest pose significant challenges. Even so, key support levels remain intact, leaving room for a potential recovery.
Abimbola Adu
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