Crypto Market Sees Decline

Crypto Market Sees Red as Bitcoin, Ethereum, and Other Tokens Plummet

The cryptocurrency market experienced a downturn this week, with Bitcoin briefly dipping below $100,000 and the crypto fear and greed index dropping from 88 to 69.

As of December 19, Bitcoin was trading at $102,300, while Ethereum dropped to $3,600. Other top-performing coins, such as Cosmis, Floki, THORChain, Curve DAO Token, and Fantom, also saw significant declines.

Federal Reserve Decision Sparks Crypto Crash

The primary reason for the crypto crash is attributed to the Federal Reserve decision to cut interest rates by 0.25%, which was widely expected. This cut brings the cumulative cuts this year to 1%. However, the Fed signaled that it would only implement two additional cuts in 2025, citing its focus on controlling inflation.

Officials expect inflation to remain persistently high, reaching the 2% target only in 2026 or 2027. The hawkish tone from the Fed led to declines in cryptocurrencies and other risk assets. U.S. equity markets plunged, with the Dow Jones and Nasdaq 100 indices falling over 2%.

Mean Reversion and Distribution Contribute to Crypto Decline

Crypto is also down due to profit-taking, panic, mean reversion, and the Wyckoff Method distribution.

Historically, crypto investors take profits when Bitcoin and other tokens rally too much. This profit-taking can be explained in terms of mean reversion and the Wyckoff Method.

Mean reversion is a situation where an asset in an uptrend falls so that it can move close to its historical averages. For example, Solana remains about 20% above the 200-day moving average, indicating a potential drop to get closer to that level.

The Wyckoff Method identifies key phases in an asset’s lifecycle: accumulation, markup, distribution, and markdown. The recent crypto surge was part of the markup phase, while the ongoing decline could signify either a distribution phase or the start of markdown.

Will Crypto Prices Bounce Back?

Cryptocurrency prices often mirror Bitcoin’s movements. Bitcoin’s cup-and-handle pattern indicates the potential for a rally to $122,000 in the near term. If this happens, it could trigger a recovery across altcoins as investors capitalize on the dip.

However, the immediate aftermath of a dip may lead to a “dead cat bounce,” where an asset experiencing a significant decline temporarily recovers before resuming its downtrend.

For the latest news and updates on the cryptocurrency market, visit Global Crypto News.