Bitcoin's price is struggling around $94,000, while a series of upcoming macro events are weaving a difficult-to-break downward web for the world's largest cryptocurrency.
In the early hours of the Bitcoin market, a shocking scene unfolded again—prices plummeted nearly $5,000 within an hour, with over $500 million in long positions being forcibly liquidated. This is just a glimpse of the market's recent fragility.
In what seems to be a calm early December, three powerful bearish forces are quietly gathering, all pointing to one conclusion: Bitcoin is likely to face sustained pressure in December, with little chance of improvement.
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01 Federal Reserve interest rate decision: Expectations exhausted, good news fully priced in
On December 11, the Federal Reserve will hold its last interest rate meeting of the year. The market generally expects another rate cut of 25 basis points, which has already been largely priced in.
Since the end of November, Bitcoin has risen from $80,600 to $94,200, an increase of about 16.8%, largely based on expectations of continued easing policies from the Federal Reserve.
The market's expectation of a rate cut in December has reached a high probability of 87%, but such strong consensus expectations can often be a dangerous signal. Once expectations materialize, the market may face a classic reversal of 'buy the expectation, sell the fact.'
Market analysts warn that when anticipated positive developments turn into reality without new driving factors, prices often experience a pullback. The current Bitcoin price is close to the critical resistance level of $95,000, and if it cannot break through this level, upward momentum may dry up.
02 Bank of Japan interest rate hike: Global liquidity is further drained
On December 19, the Bank of Japan may announce its second interest rate hike of the year, which is another significant risk that the market has underestimated.
This decision will further tighten global liquidity, directly affecting the valuation environment for risk assets.
The transmission path of Japan's interest rate hikes to global liquidity:
1. The Bank of Japan raises interest rates;
2. The cost of yen carry trades increases;
3. Investors are forced to close high-yield assets;
4. Global dollar liquidity tightening;
5. Risk assets like Bitcoin are under pressure.
Japan's long-maintained ultra-low interest rate environment has provided a large amount of cheap funds to global markets, which flow into risk assets including Bitcoin through various channels. A shift in the Bank of Japan's policy would reverse this fund flow, directly impacting the cryptocurrency market.
Hedge funds have begun positioning for this risk, as short positions in the yen have significantly decreased, indicating that professional investors are adjusting their strategies in advance to cope with the market turbulence brought about by the Bank of Japan's tightening policies.
03 Pre-holiday market: Periodic pressure of fund withdrawals
The holiday season at the end of the year typically brings a decline in market liquidity and a rebalancing of portfolios, further amplifying price volatility.
Institutional investors often lock in profits at the end of the year, reducing risk exposure in preparation for annual reports. This seasonal behavioral pattern may add additional selling pressure on Bitcoin.
Technical analysts note that in the past five years, Bitcoin has performed poorly in the last two weeks of December in four out of those five years, with an average drop of about 5-8%. This historical pattern may become more pronounced this year, as the market has already experienced nearly two months of sustained growth.
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Institutional investors have been adjusting their positions in advance. Data shows that some large funds are reducing their long positions in Bitcoin futures while increasing cash reserves in preparation for a possible market adjustment.
The technical chart shows that Bitcoin faces strong resistance around $95,000, while the support level is around $85,000, indicating a downside potential of about 10%.
Historical data indicates that when multiple macro risks occur simultaneously, the average drop for Bitcoin can reach 15-20%, and the current market faces triple pressures from the Federal Reserve's interest rate decisions, the Bank of Japan's rate hikes, and the pre-holiday market.
The only thing that could reverse this pessimistic outlook is if the Federal Reserve releases significantly more dovish signals than expected, but with inflation in the U.S. still above 3%, this possibility is extremely low.
