Fear and Profit-Taking Lead to Sharp Crypto Market Decline

Crypto Market Plunges as Bitcoin Dips Below $100K

On December 19, Bitcoin (BTC) briefly fell below $100,000, and the Crypto Fear and Greed Index dropped from an “Extreme Greed” zone of 88 to 69. Ethereum (ETH) also declined to $3,600, with major laggards including Cosmos, Floki, THORChain, Curve DAO Token, and Fantom.

Key Highlights:

• Federal Reserve’s decision triggers market crash
• Profit-taking and market corrections drive volatility
• Will Bitcoin recover and lead a market rebound?

Fed’s Policy Sparks Sell-Off

The primary reason behind the crypto crash was the Federal Reserve’s monetary policy update. Although the Fed cut interest rates by 0.25% as expected, bringing total rate cuts this year to 1%, its hawkish outlook rattled markets.

The Fed announced plans for only two additional rate cuts in 2025, citing concerns over inflation, which it expects to stabilize around 2% only by 2026 or 2027. This cautious tone weighed heavily on cryptocurrencies and other risk assets.

The U.S. equity markets mirrored the crypto market downturn, with the Dow Jones and Nasdaq 100 indices falling over 2%. Meanwhile, U.S. Treasury yields climbed to multi-month highs, with the 10-year yield reaching 4.557% and the 30-year yield hitting 4.7%. The U.S. Dollar Index surged to a two-year high.

Profit-Taking and Market Corrections

The downturn was also fueled by profit-taking, panic selling, mean reversion, and Wyckoff Method distribution phases.

Historically, crypto investors lock in profits after significant rallies. This behavior aligns with mean reversion and Wyckoff’s framework, which categorizes market cycles into accumulation, markup, distribution, and markdown phases.

For example, Solana remains 20% above its 200-day moving average, signaling potential for further corrections as it reverts closer to the mean.

Can the Crypto Market Rebound?

Crypto prices often follow Bitcoin’s lead. Bitcoin’s current cup-and-handle chart pattern hints at the possibility of a rally to $122,000 in the near term. Such a rebound could encourage altcoin recovery as investors seize buying opportunities.

However, markets may also witness a “dead cat bounce,” a phenomenon where a significant dip sees a brief recovery before resuming its downward trajectory.