Matrixport Market Observation: BTC Year-End Consolidation, Crypto Market Awaits Catalysts

After four consecutive weeks of upward movement, the BTC price sharply dropped after reaching a historical high of $108,353 on the 17th, quickly plunging to $92,232 within three days, with a maximum decline of 14.87%. Currently, as market sentiment gradually stabilizes, the price has recovered to around $94,000, entering a consolidation phase. The current support level for BTC price is around $92,000. Meanwhile, altcoins are experiencing significant losses, with many token prices even falling to levels seen before October, erasing the "Trump effect" gains that followed Trump's election as President of the United States (the above data is sourced from Binance spot market, December 10, 17:00).

Although market trading volume has decreased, BTC spot ETF trading volume remains strong, averaging $4.4 billion per day, reflecting that market activity is still high. Additionally, on December 23, MicroStrategy officially entered the Nasdaq 100 index, which may open the door for mainstream U.S. funds to passively allocate BTC.

Market Interpretation

On October 23, all three major U.S. stock indices rose, with the Dow Jones increasing by 70 points and the Nasdaq rising by about 1%. Affected by the Christmas holiday market closure, trading sentiment was subdued on Monday, during which "BTC whale" MicroStrategy's stock price fell by 8.8% due to BTC price fluctuations. The hawkish signals released by Powell have led to significant volatility in the U.S. stock market. However, considering the market's high expectations for stimulus policies from the new U.S. government, the stock market may stabilize after short-term fluctuations.

BTC enters the year-end consolidation phase; investors need to closely monitor trends for key signals

Last week, BTC experienced year-end consolidation, retreating from the historical high of $108,353 to a local low of $92,000, with a maximum decline of about 15%. The internal reason for this BTC market correction is mainly due to short-term profit-takers achieving over 30% profit margins, with some choosing to cash out, leading to an increased probability of a pullback. The external factors include the Federal Reserve's interest rate cuts, the Trump effect, and MicroStrategy's BTC purchases, which have passed the initial strong phase and entered a pre-holiday resting period. Additionally, factors such as the Christmas holiday, which significantly impacts BTC ETFs, have contributed to BTC entering an adjustment phase.

The buying power game amid BTC sell-off; prices may reach new highs amidst fluctuations

The behavior of short-term and long-term holders has had a significant impact on price trends. According to the latest data from eMerge Engine under EMC Labs, a total of 268,581 BTC were transferred to exchanges this week, with short-term holders contributing 256,826 BTC and long-term holders contributing 11,755 BTC. This marks the second-largest sell-off week since November.

Despite this, the buying power in the market, especially through funds from BTC ETFs, has successfully absorbed this selling pressure. According to eMerge Engine data, the BTC inventory on CEX decreased by 27,901 BTC this week. Furthermore, the floating profit of short-term holders dropped from a previous high of 33% to 25%, a level typically regarded as neutral in a bull market.

Notably, the selling volume of long-term holders, who have a decisive influence, has been declining consecutively. This indicates that BTC prices are likely to pull back above $100,000 and gradually rise amidst fluctuations.

MicroStrategy officially included in Nasdaq 100 and has increased BTC holdings for seven consecutive weeks, supporting long-term BTC price development

On December 23, MicroStrategy (MSTR.US) announced an additional purchase of $560 million in BTC at an average price close to BTC's historical high, marking the seventh consecutive week of increasing BTC holdings. According to documents submitted to the U.S. Securities and Exchange Commission, from December 16 to 22, MicroStrategy purchased 5,262 BTC at an average price of about $106,662, which is the lowest purchase quantity in recent weeks.

During the same period, MSTR was included in the Nasdaq 100 index on December 23. Passive funds like QQQ (Invesco QQQ Trust, an ETF tracking the Nasdaq 100 index) will be forced to automatically purchase MSTR, which in turn will allow MSTR to use these funds to buy more BTC.

The entire passive investment ecosystem in traditional finance will unconsciously purchase more BTC due to MSTR's inclusion in major indices, just as they may not realize they hold NVIDIA stocks. Therefore, as long as MSTR continues to use these funds to buy more BTC, the buying pressure for BTC will continue to grow.

Macroeconomic Dynamics

Federal Reserve's hawkish rate cut disrupts the market; cryptocurrencies experience "Black Thursday"

On December 18, the Federal Reserve cut the federal funds rate target range by 25 basis points for the third time, to between 4.25% and 4.50%. Powell clearly stated that the timeline for controlling inflation is not as expected, and various economic data in the U.S. is performing strongly, leading the Federal Reserve to adopt a very cautious attitude towards the pace of rate cuts next year. The market generally believes that the Federal Reserve will lower market rate cut expectations for 2025, reducing next year's cuts from more than three times to below two times.

At the same time, Powell declared, "The Federal Reserve does not allow holding BTC and does not consider participating in a government BTC reserve program." The Federal Reserve's hawkish shift has also suppressed the speculative sentiment released by Trump in the cryptocurrency market.

Due to uncertainties from the Trump administration, U.S. consumer confidence in December experiences its first decline since March

According to data released by the World Large Enterprises Alliance on Monday, the consumer confidence index in December fell to 104.7, below the market expectation of 113.2, marking the median level of the range over the past two years. The confidence index among consumers aged 35 and above has also declined.

Consumers are less optimistic about business conditions and their income prospects. Indicators measuring expectations for the next six months and current conditions have both decreased, which may further affect market confidence in a soft landing for the U.S. economy.

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