The information, opinions, and judgments regarding the market, projects, cryptocurrencies, etc., mentioned in this report are for reference only and do not constitute any investment advice.
This week, BTC opened at $104,445.15 and closed at $95,087.75, reaching an all-time high of $108,388.88 on December 17. Ultimately, this week recorded a decline of 8.96%, with a volatility of 15.58%. Trading volume slightly increased, but remained at roughly the same level as the previous two weeks.
This week marks the first weekly market correction for BTC since its 38% rise in November. The core factor remains profit-taking by investors. In this cycle, whenever the profit margin for short-term investors exceeds 30%, the probability of a correction quickly increases until their selling profit margin decreases or the cost of continued purchases becomes too high, at which point the market begins its next phase of evolution.
At the same time, external changes also support the adjustment, with the main forces behind BTC's increased adoption being: the Federal Reserve's interest rate cuts, the Trump effect, and MicroStrategy's BTC purchases, all of which have passed their initial strong phase and entered a holiday rest period. Additionally, factors such as the Christmas holiday, which significantly impacts BTC ETFs, make the adjustment for BTC quite reasonable.
It should be noted that the above factors are not short-term forces; in the long run, they will contribute to BTC's long-term development. For example, MicroStrategy will officially enter the Nasdaq-100 index on December 23, opening the door for mainstream U.S. funds to passively allocate BTC.
In the past week, capital inflow has shown a noticeable slowdown, which may continue for 1-2 months. Correspondingly, the scale of selling by both long-term and short-term investors has also begun to slow down significantly, returning to levels seen before this round of price increases. With both sides in balance, the probability of the market being in a consolidation phase increases.
During this period, if the capital maintains a relatively net inflow status and the cost for short-term investors rises further to above $90,000, the space for the next major upward wave will further open up.
The relative support level for this adjustment may be around $85,000—the cost line for short-term investors, which is currently in a gradual upward trend.
Macroeconomic and Financial Data
On December 18, the Federal Reserve lowered the target range for the federal funds rate by 25 basis points for the third time, to between 4.25% and 4.50%. Unlike this widely anticipated rate cut, Fed Chairman Powell delivered a hawkish speech that exceeded expectations.
Powell clearly stated that the timeline for controlling inflation is not as expected, and various economic data in the U.S. is performing strongly. Coupled with predictions regarding the impact of Trump's policies after taking office, the Fed is taking a very cautious stance on the pace of interest rate cuts for next year. The market interprets this as a clear statement regarding a slowdown in rate cuts in 2025, with expectations for next year being reduced from more than three cuts to fewer than two.
The Dow Jones has fallen for three consecutive weeks since reaching a new high in early December, dropping 2.25% this week; the Nasdaq, after four consecutive weeks of increases and new highs, recorded its first weekly decline of 1.78%. The small-cap index Russell 2000, which is more correlated with BTC, fell 4.5% this week.
The U.S. dollar index rose 1.23% to 108.26 on the day of the rate cut, followed by a pullback to 107.71 in the following days. London spot gold remained stable above $2,600.
Capital and Supply Analysis This week, capital continued to flow in at $1.202 billion, a significant slowdown compared to last week's $6.7 billion. Notably, there was a continuous net inflow over four days starting December 19, while BTC ETFs experienced a net outflow of $670 million on that day, overall diluting the inflow seen in the previous days.
On the supply side, over the past month, as BTC prices rapidly increased, the average daily transfer of BTC to exchanges by long-term and short-term investors rose from 30,000 coins per day to 40,000-45,000 coins per day. In the past week, this number gradually fell back to around 30,000 coins.
The BTC inventory on exchanges continues to decline to 2.7843 million coins, a decrease of 16,000 coins from last week, indicating that the accumulation trend of chips is still ongoing.
The cost line for short-term investors is $85,700, with profits decreasing from 33% to 13%.
In terms of leverage, borrowing rates have dropped from a peak of 40% in the previous two weeks to around 10% and remain stable. The funding rate for contracts has also decreased from a peak of 99% to around 9%. Both indicate a rapid decline in market leverage.
Ecosystem Analysis
The number of new BTC addresses and active addresses remains stable, but the scale of value transfer has significantly declined.
The Ethereum ecosystem has seen a slight increase in new addresses and active addresses. Other active platforms such as Solana, Base, and Polygon continue to show strong vitality, with significant growth in new addresses, active addresses, and transactions.
Cycle Indicators
The EMC BTC Cycle Metrics indicator is at 0.75, indicating that the market is in an upward phase.
END
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For more information, please visit: https://www.emc.fund
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