Preface

The recent slip in bitcoin (BTC) prices has triggered significant liquidations, amounting to over $700 million across major cryptocurrencies. This shake-up impacted popular tokens such as XRP and dogecoin (DOGE), leading to substantial losses. The volatility follows signaling from the Federal Reserve regarding future interest rate policies and discussions about regulatory stances on bitcoin holdings, reflecting the intricate tension between economic policy and cryptocurrency market stability.

Lazy bag

The downturn of bitcoin prices under $100K initiated a wave of liquidations exceeding $700 million. This not only affected BTC but also extended losses heavily to XRP dropping 5% and impacting other major altcoins. These transitions reflect the market's response to Federal Reserve's monetary signals and regulatory comments on cryptocurrency holdings.

Main Body

During the recent U.S. trading hours, bitcoin experienced a sharp downturn, plummeting below the $100,000 mark before recovering slightly as trading shifted towards Asian markets. This volatility has been attributed to the Federal Reserve's announcement regarding potential interest rate reductions anticipated by 2025. Federal Reserve Chair Jerome Powell mentioned at a post-FOMC press conference that under current regulations, the Fed is not allowed to hold bitcoin, further intensifying discussions around cryptocurrency as part of governmental reserve strategies. This clarification came on the heels of President-elect Donald Trump’s campaign assertions promising a strategic reserve in bitcoin, intending to keep any seized or acquired BTC.

The market's reaction to Powell's announcement saw bitcoin prices drop by 3%, which consequently caused ripples across other major cryptocurrencies. Coins like XRP, DOGE, and Solana's SOL decreased by up to 5.5%, while Binance Coin's BNB and Ether (ETH) faced declines of 2.5%. Chainlink's LINK suffered the most extensive losses, with a 10% decrease, which overshadowed gains from earlier investments, including a significant acquisition by World Liberty Financial, a company backed by Trump.

This downturn prompted the liquidation of bullish positions to exceed $700 million, affecting futures linked to not only BTC and ETH but also several smaller altcoins and meme coins. Large-scale liquidations like these often suggest economic extremes or heightened market sentiment, which can lead to drastic price reversals. In this scenario, traders speculated that Jerome Powell's comments might establish a local top of the market, reducing optimism about a prolonged rally through the month.

With the prospect of a U.S. Bitcoin strategic reserve now uncertain, Nick Ruck of LVRG Research suggested that the recent uptrend might have reached its zenith. In spite of expected interest rate cuts usually resulting in bullish outcomes, the market's strong negative reaction appeared to stem from concerns over persistent inflation in the upcoming year, as highlighted by Powell.

Contrarily, Singapore's QCP Capital traders maintain a positive outlook on the broader cryptocurrency trajectory, especially considering Trump's possible influence on the market in 2025. They advised investors in a broadcast message to remain steadfast amidst temporary downturns, arguing that the year could still usher considerable gains for the cryptocurrency market.

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