Dec. 20, 2024

CoinDesk 20 Index: 3,146.81  -14.24%
Bitcoin (BTC): $93,815.90  -8.28%
Ether (ETH): $3,234.63   -12%
S&P 500: 5,867.08  -0.08%
Gold: $2,604.32  +0.37%
Nikkei 225: 38,701.90  -0.29%

Crypto prices suffered a blowout as the post-FOMC risk-off behavior extended into a third day. BTC fell below $93,000, a drop of nearly 9% in the last 24 hours, while the altcoin market suffered even worse. DOGE leads the losses, falling more than 25% to under $0.27, while ETH, SOL and XRP are all also staring at double-digit drops. Reaction to a hawkish FOMC triggered a sharp sell-off across all risk assets on Wednesday and Thursday. Nasdaq plummeted 3.5%, S&P 500 dropped 2.9% and BTC declined more than 6% since the meeting, where Fed Chair Jerome Powell hinted at only a few rate cuts in 2025.

Traders at Singapore-based QCP Capital attributed the market crash to overly bullish sentiment in the past month. “While it is easy to blame the selloff on the Fed’s hawkish cut, we believe the root cause of the morning’s crash to be the market's overly bullish positioning,” QCP said in a Telegram broadcast. “Since the election, risk assets have enjoyed an impressive one-sided run, leaving the market extremely vulnerable to any shocks. While the Fed's 25bps cut was expected, the source of panic can be attributed to the dot plot, which was revised lower. Due to persistent inflation, the Fed now projects two rate cuts for 2025 compared to the market’s consensus of 3 rate cuts,” QCP added.

Spot bitcoin ETFs registered record outflows Thursday and the CME futures premium dropped into single digits in a sign of weakening short-term demand. Investors ended a 15-day streak of inflows by withdrawing a net $671.9 million from the 11 ETFs, the largest single-day tally since their inception on Jan. 11. The bearish sentiment was mirrored in the derivatives market, where the annualized premium in the CME's regulated one-month bitcoin futures fell to 9.83%, the lowest in over a month. A decline in the premium means cash-and-carry arbitrage bets involving a long position in the ETF and a short position in the CME futures yield less than they did earlier. As such, the ETFs may continue to see weak demand in the short term.

Bitcoin's losses this week have caused the 50-hour simple moving average (SMA) to dip below the 200-hour SMA, confirming a bearish crossover. The pattern suggests that the ongoing pullback could evolve into a deeper one, although the signal has failed to live up to its reputation during the recent bull run.

Bitcoin has experienced a few pullbacks during its post-U.S. election rally from $70,000 to over $100,000, and each one has ended with a bearish crossover of the 50- and 200-hour SMAs.

This latest crossover, therefore, offers hope to bulls expecting a renewed move into six figures above $100,000.

A potential bounce could face resistance near $106,000, a level identified by the descending trendline, representing the recent price drop. A violation there would open doors for record highs.

It's important to remember that patterns don't always play out as expected, and the contrarian indicator discussed above may fail, potentially leading to a deeper drop. The first sign of trouble will be if prices move below the overnight low of $96,000, which could expose the swing low of around $91,000 recorded on Dec. 5.

- Omkar Godbole