The market, project, and cryptocurrency information, opinions and judgments mentioned in this report are for reference only and do not constitute any investment advice.
This week, BTC opened at $104,445.15 and closed at $95,087.75, reaching a new all-time high of $108,388.88 on December 17. The final weekly decline was 8.96%, with a high volatility of 15.58%. Trading volume slightly increased but remained at a similar level to the previous two weeks.
This week marks the first weekly correction since BTC's 38% monthly gain in early November, with the core factor still being profit-taking by short-term investors. In this cycle, whenever short-term investors' profit margins reach over 30%, the probability of a correction increases rapidly, until their profit-taking subsides or the cost of continued buying becomes too high, allowing the market to move to the next stage.
External changes have also supported the adjustment, with the key forces driving the adoption of BTC to the next level - the Fed's rate cuts, the Trump effect, and MicroStrategy's BTC purchases - having passed their initial strong periods and entering a period of rest. Additionally, factors such as the Christmas holiday, which significantly impact the BTC ETF, have also contributed to the natural correction of BTC.
It is important to note that the above factors are not short-term in nature, and in the long run, they will all support the long-term development of BTC. For example, MicroStrategy will officially join the Nasdaq-100 Index on December 23, opening the door for mainstream US funds to passively allocate to BTC.
Over the past week, capital inflows have shown a more pronounced slowdown, which 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 pre-rally levels. With this balance, the probability of a consolidation market increases.
During this period, if the capital inflow maintains a relatively net positive state, and the cost of short-term investors further rises above $90,000, the room for the next major upward wave will be further opened.
The relative support level for this correction 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 18, the Federal Reserve lowered the federal funds rate target range by 25 basis points to 4.25%-4.50%. Unlike the widely anticipated rate cut, Fed Chair 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's various data points are performing strongly. Combined with the anticipated impact of Trump's policies, the Fed is taking a very cautious approach to rate cuts next year. The market has interpreted this as a clear indication of a slowdown in rate cuts in 2025, with expectations for next year's rate cuts reduced from more than 3 times to less than 2 times.
The Dow Jones Index, which hit a new high in early December, has now declined for 3 consecutive weeks, down 2.25% this week. The Nasdaq, which had set new highs for 4 consecutive weeks, recorded its first weekly decline of 1.78%. The small-cap Russell 2000 Index, which is more closely correlated with 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 remained above $2,600, with stable prices.
In terms of capital flows and supply analysis, capital continued to flow into the market this week, but the inflow of $1.202 billion was significantly slower than the $6.7 billion of the previous week. Within this, there were consecutive net inflows for 4 days from December 19, but the BTC ETF saw a net outflow of $670 million on that day, diluting the inflow magnitude of 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 the previous week, indicating a continued trend of coin accumulation.
The cost basis of short-term investors is $85,700, with their profitability declining from 33% to 13%.
In terms of leverage, borrowing rates have declined from the previous two-week peak of 40% to around 10% and remained stable. Contract funding rates have also fallen from a peak of 99% to around 9%, both indicating a rapid decline in market leverage.
Ecosystem Analysis
BTC's new addresses and active addresses have remained relatively stable, but the scale of value transfer has declined significantly.
The Ethereum ecosystem has seen a slight increase in new addresses and active addresses. 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 the market is in an upward phase.
END
EMC Labs was founded in April 2023 by crypto asset investors and data scientists. It focuses on blockchain industry research and Crypto secondary market investment, with industry foresight, insights, and data mining as its core competencies, aiming to participate in the thriving blockchain industry through research and investment, and to promote blockchain and crypto assets to bring well-being to humanity.
For more information, please visit: https://www.emc.fund
