On the last day of 2024, BTC experienced a sharp short-term drop to $92,000, with a total of $277 million in liquidations across the network in the past 24 hours, including $185 million in long liquidations and $92.16 million in short liquidations. At the same time, the US stock market opened, with crypto concept stocks and the "Big Tech Seven" all declining, with the Dow Jones falling 1.04%, the S&P 500 falling 1.13%, and the Nasdaq falling 1.33%.
Since entering the Christmas season in late December, BTC has experienced multiple sharp short-term drops. BlockBeats has compiled the market reasons for BTC's decline, which are for readers' reference only.
Strong US Dollar, US Stocks and Crypto Market Underperform
According to data from Bank of America, the US stock market saw about $35 billion in outflows last week, the highest weekly outflow since December 2022. Additionally, Goldman Sachs' trading department estimates that due to the performance of stocks and bonds, US pension funds will sell $21 billion in US stocks and buy an equivalent amount of bonds by the end of this December.
Last Friday, the yield on the 10-year US Treasury bond rose nearly 1% to 4.629%, close to a seven-month high, and the US stock market may face the risk of a frenzied selloff. Wall Street analysts believe that in the absence of major news, data, and thin trading, the 10-year US Treasury yield, which serves as an anchor for asset pricing, will have an impact on the stock market, and the higher the yield, the greater the pressure on the stock market.
As the strong US dollar has weighed on global currencies and assets, including BTC, when the US dollar strengthens, dollar-denominated assets become more attractive compared to cryptocurrencies. Investors prefer traditional investments such as US Treasuries or stocks, which can generate returns in a strong US dollar environment. At the same time, the decline in liquidity and investors' year-end profit-taking further weaken the possibility of a sustained rise in cryptocurrencies.
BTC Spot ETF Net Outflows
BTC spot ETF data has shifted from a net inflow state during the Trump era to a net outflow state, with a cumulative net outflow of $377.6 million last week, and a net outflow state on the previous day. On December 27, the Fidelity FBTC ETF had a net outflow of $208 million, setting a new record for the highest single-day net outflow.
Options Expiration, Quarterly Volatility Selloff
On December 17, QCP had stated that the options market was sending some cautious signals, as put options continued to be skewed relative to call options, even as the spot price hit new highs - perhaps reflecting investors' preference for hedging risk rather than actively chasing the uptrend.
On December 28, nearly $20 billion in BTC and ETH options expired, accounting for nearly half of Deribit's total open interest, and BTC price also fell from $97,000 to $94,000 on the same day. QCP believes this is a typical quarterly volatility selloff, especially given the continued spot volatility and options sellers continuing to unwind their positions.
Adam, an analyst at Greeks.live, also posted on social media that the differences in option Skew across tenors have widened. Since the bull market began at the end of this year, the Skew across tenors has been very close, fluctuating around 5%, with most of the differences not exceeding 1%. However, as the market has recently entered a correction, the differences have started to widen, with short-term Skew declining more. These data indicate that the market's exuberance has clearly declined, and options market participants' optimism for January has weakened.
Stablecoin Minting Declines, USDT FUD Impacts Market Confidence
Stablecoin minting has declined significantly since December. Just on December 13, Tether minted 1 billion USDT on Ethereum, and USDC's minting in December was only 200 million. However, since November 6, Tether has minted 21 billion USDT on the Ethereum and TRON blockchains.
Today, the EU's MiCA legislation has officially taken effect, but Tether's USDT has not yet received regulatory compliance certification, raising concerns about its future in the EU market. MiCA imposes strict requirements on stablecoin issuers, and major stablecoins like Tether may face capital reserve and liquidity requirements, potentially leading to their exit from the EU market. Some EU trading platforms have already begun taking measures to address the new regulations, with Coinbase Europe delisting USDT and other stablecoins.
Nevertheless, Tether's massive market capitalization and global adoption make it unlikely to face immediate financial shocks. Tether's CEO Paolo Ardoino posted on social media that "don't believe the FUD. Competitors are just eager to make you believe in things that don't exist. USDT is safe."
It is worth noting that Tether itself has not experienced any financial issues or illegal activities, and Tether will focus on supporting new stablecoin projects, such as launching the EURQ and USDQ stablecoins that comply with MiCA standards. However, given the history of stablecoin blowups in the previous cycle, short-term USDT FUD will still impact market confidence.
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