The market, project, cryptocurrency and other information, opinions and judgments mentioned in this report are for reference only and do not constitute any investment advice.
Author: Shang2046
This week, BTC opened at $104,445.15 and closed at $95,087.75, reaching a new all-time high of $10,838.88 on December 17th. The final weekly decline was 8.96%, with a high volatility of 15.58%. Trading volume slightly increased but remained at the same level as the previous two weeks.
This week is the first weekly correction since BTC's 38% monthly increase in early November. The core factor is still profit-taking by short-term investors. In this cycle, whenever short-term investors' profit margins reach above 30%, the probability of a correction increases rapidly, until their profit margins decrease or the cost of continuous buying becomes too high, and the market will then enter the next stage of development.
Meanwhile, external changes also support the adjustment, as the main forces driving the increase in BTC adoption to the next level - the Fed's rate cuts, the Trump effect, and MicroStrategy's BTC purchases - have passed their initial strong period and entered a period of rest. In addition, factors such as the Christmas holiday, which have a significant impact on the BTC ETF, also make the BTC correction reasonable.
It should be noted that the above factors are not short-term forces, and in the long run, they will all help the long-term development of BTC. Taking MicroStrategy as an example, on December 23rd, it will officially enter the Nasdaq-100 index, which will open the door for mainstream US funds to passively allocate BTC.
Over the past week, capital inflows have shown a significant slowdown, and this may continue for 1-2 months. Correspondingly, the scale of selling by both long-term and short-term investors has also started to slow down, returning to the level before this round of rise. Under the balance of the two, the probability of a volatile market increases.
During this period, if the capital market maintains a relatively net inflow state, and the cost of short-term investors further rises above $90,000, the space for the next major upward wave will be further opened.
The relative support level of this adjustment may be around $85,000 - the cost line of short-term investors, which is currently in a process of gradual increase.
Macroeconomic and Financial Data
On December 18th, the Fed lowered the federal funds rate target range by 25 basis points to 4.25%-4.50%. Unlike the widely expected rate cut, Fed Chairman Powell delivered a more hawkish speech than expected.
Powell clearly stated that the time to control inflation is longer than expected, and the US economy is performing strongly across the board. Combined with the anticipation of the impact of Trump's policies, the Fed is taking a very cautious attitude towards rate cuts next year. The market understands this as a clear statement of a slowdown in rate cuts by 2025, with expectations of no more than 2 rate cuts next year, down from more than 3 previously.
The Dow Jones Index has fallen for 3 consecutive weeks after hitting a new high in early December, down 2.25% this week; the Nasdaq, which had risen for 4 consecutive weeks to new highs, recorded its first weekly decline of 1.78%. The small-cap Russell 2000 index, which is more closely related to BTC, fell 4.5% this week.
The US dollar index rebounded 1.23% to 108.26 on the day of the rate cut, and then retreated to 107.71 in the following days. London spot gold has basically remained above $2,600, with stable prices.
Capital Flows and Supply Analysis
Capital inflows this week continued at $1.202 billion, a significant slowdown from last week's $6.7 billion. Within this, there were consecutive net inflows for 4 days from December 19th, but the BTC ETF had a net outflow of $670 million on that day, which diluted the inflow magnitude in the previous few days.
On the supply side, over the past month, as BTC prices have risen rapidly, the average daily amount of BTC transferred from long-term and short-term investors to exchanges has increased from 30,000 BTC/day to 40,000-45,000 BTC/day. Over the past week, this figure has gradually fallen back to the 30,000 BTC level.
Exchange BTC reserves have continued to decline to 2.7843 million BTC, a decrease of 16,000 BTC from last week. This shows that the trend of coin accumulation is still ongoing.
The cost line of short-term investors is $85,700, with their profitability declining 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 remained stable. Contract funding rates have also dropped 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 has remained stable, but the scale of value transfer has declined significantly.
The number of new Ethereum addresses and active addresses has grown slightly. Other active platforms such as Solana, Base, and Polygon have maintained strong vitality, with significant growth in new addresses, active addresses, and transactions.
Cycle Indicators
The EMC BTC Cycle Metrics indicator is 0.75, indicating that the market is in an upward phase.
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