As of December 22, 2024, sharp downward waves continue in the cryptocurrency market. While Bitcoin (BTC), the market leader, fell to $93,000, Ethereum (ETH), the largest altcoin, fell to $3,300. While the charts of major cryptocurrencies generally remained red, the altcoin market also experienced losses of up to 30 percent. So, what could be the reasons behind these recent declines?
The main reasons for the decline in the crypto market
One of the reasons may be the uncertainty of the FED’s interest rate policy. FED officials reduced their previous prediction of four interest rate cuts for 2025 to two, increasing the selling pressure in the markets. Reduced interest rate cut expectations led to an escape from risky assets. Since cryptocurrencies are very sensitive, especially to interest rate decisions, this caused sharp movements in prices.
Another reason may be macroeconomic uncertainties. Although recession concerns in the USA have eased, weak economic data from China and Europe have reduced risk appetite in global markets. These developments caused investors to move away from volatile assets such as crypto.
In addition, liquidations in leveraged transactions also caused the decline to deepen. During this period, more than $1.2 billion was liquidated in leveraged transactions on major crypto exchanges. Bitcoin’s loss of $95,000 support triggered chain liquidations, accelerating the decline. Similar liquidations occurred in Ethereum and altcoins.
Finally, in the last 48 hours, on-chain data showing that whales transferred large amounts of crypto to exchanges was interpreted as a negative sign. Large transfers, especially from Bitcoin and Ethereum wallets, created selling pressure among investors and pulled prices down.
Michael van de Poppe, one of the popular analysts, expressed his views on the current situation of the market with the following words:
These declines are due to the overleveraged structure of the cryptocurrency market. If Bitcoin stays above the support point at $90,000, a recovery can be expected.
Although such declines are inevitable due to the volatile nature of the crypto market, they can create opportunities for long-term investors. However, it is important for investors to keep their risks under control and follow market news closely.
The information in the article is for informational purposes only. It does not constitute any investment advice. The author and cryptoparahaber.com are not responsible for your profit or loss arising from the investments you make. Investment is ultimately based on many foundations such as knowledge, experience, research and personal decisions.
