On December 20, 2024, the cryptocurrency market experienced a significant decline. The main reasons include:
Impact of Federal Reserve policy: The Federal Reserve announced a 25 basis point interest rate cut at its meeting on December 19 and cut its forecast for interest rate cuts in 2025 from four to two. This "hawkish" stance triggered market concerns about future economic growth, causing investors to rise in risk aversion and sell high-risk assets, including cryptocurrencies.
Stock market volatility: U.S. stocks have been weak recently, with the S&P 500 and Nasdaq falling continuously. The decline in the stock market has exacerbated investor risk aversion, further affecting the performance of the cryptocurrency market.
Leveraged trade liquidations: As cryptocurrency prices fell, approximately $600 million in leveraged long positions were liquidated in the market. This massive liquidation added to market volatility, causing prices to fall further.
Market Sentiment and Profit Taking: Market participants tend to adopt risk-off strategies ahead of the Fed meeting, leading to increased selling pressure. In addition, some investors chose to take profits at high prices, exacerbating the downward pressure on the market.