Recent developments in the cryptocurrency market have resulted in a significant bitcoin (BTC) decline, plunging below $100,000. This sudden downturn triggered over $700 million in liquidations across various futures tied to major cryptocurrencies. Among those affected, XRP and dogecoin (DOGE) experienced notable losses, contributing to the overall market turmoil.
During late U.S. trading hours, BTC slipped significantly before showing slight recovery as the Asian market opened. The Federal Reserve’s hint at potential rate cuts in 2025 added to the volatility. Fed Chair Jerome Powell indicated at a post-FOMC press conference that current regulations prevent the central bank from holding bitcoin, responding to inquiries related to President-elect Donald Trump’s proposal regarding a strategic reserve.
Powell stated, “That’s the kind of thing that Congress should consider, but we are not looking for a law change.” This comment followed Trump’s assertion during his campaign about keeping all bitcoin that the government has or acquires in the future, referring to the stockpile of seized BTC.
In response to Powell’s remarks, BTC dropped by 3%, resulting in a broader decline across major cryptocurrencies. XRP, DOGE, and Solana (SOL) faced losses of up to 5.5%, while BNB Chain’s BNB and ether (ETH) dropped by approximately 2.5%. Chainlink’s LINK was hit hardest, enduring a 10% fall which wiped out earlier gains attributed to Trump-backed World Liberty Financial purchasing $2 million worth of tokens.
The overall market’s downward spiral led to an unprecedented number of liquidations, exceeding $700 million in bullish bets. Interestingly, futures tied to smaller altcoins and meme tokens recorded heavier losses compared to BTC or ETH futures, highlighting an unusual trend.
A liquidation occurs when an exchange liquidates a trader’s leveraged position due to inability to meet margin requirements. Such widespread liquidations often signal market extremes like panic selling or buying. The subsequent cascade of liquidations may indicate a potential market turning point, suggesting that a price reversal could be on the horizon due to an overreactive market sentiment.
Some analysts speculate that Powell’s comments may signify a local peak in prices, dampening hopes for a sustained rally this month. Nick Ruck, director at LVRG Research, conveyed to CoinDesk, “Crypto markets may have entered a peak if a U.S. Bitcoin strategic reserve is no longer in play, as this promise fueled the recent months’ rally to new all-time highs. Although an interest rate cut typically sparks bullish responses, the market reacted negatively after Powell indicated that inflation would persist as a concern for the next year.”
Conversely, traders at Singapore-based QCP Capital maintain a bullish outlook for the upcoming year. They advised against making hasty decisions in response to market drops, encouraging investors to hold their positions. “With 2025 poised to be a potentially bullish year for crypto, particularly with Trump in office, staying the course may prove beneficial,” they commented in a broadcast message.
As the cryptocurrency market continues to evolve, keeping an eye on events and regulatory discussions remains critical for navigating future trends.
