Do to the rise in US bond yields and investors adjusting their expectations for the Federal Reserve's monetary policy, the US dollar index (DXY) has hit a new high, and the cryptocurrency market has seen a second consecutive day of correction.
Over the past 24 hours, BTC briefly fell to a low of $92,600 during the session, and as of the time of writing, has rebounded to around $94,400, still down 2.1% over the past 24 hours, while Ethereum has fallen to around $3,330.
VX: TTZS6308
The Federal Reserve meeting minutes released today further indicate that at the meeting to be held at the end of this month, officials are generally willing to maintain the interest rate unchanged. The market has therefore adjusted its expectations for the Federal Reserve's future monetary policy, and risk assets have come under pressure and fallen.
The two-day pullback has led to the liquidation of nearly $1 billion in crypto leveraged derivative positions, mainly long positions betting on an increase.
This correction in the Bitcoin price reflects the market's adjustment of its previous optimistic expectations for Bitcoin. The previous optimism was mainly based on two assumptions:
First, that the Federal Reserve would adopt a more accommodative monetary policy, i.e. actively cutting interest rates;
Second, that if Trump were re-elected as US president, it would likely bring a clearer regulatory framework for the cryptocurrency industry.
However, the current economic data and the Federal Reserve's stance have led the market to doubt the realization of the above two assumptions.
In the absence of new market narratives to drive it, the cryptocurrency market is gradually returning to the logic of the traditional financial market. When interest rates are low, investors usually tend to increase their allocation to risky assets (such as cryptocurrencies and tech stocks) in search of higher returns. However, due to the continued uncertainty around the Trump administration's cryptocurrency policy, market sentiment is cautious, and this uncertainty is expected to persist for some time.
In the short term, Bitcoin prices may therefore enter a period of violent fluctuations.
The article published the day before yesterday, When will the Bitcoin bull run start? When to enter and when to exit?, also clearly told everyone not to chase the rally for now, but first see if 100,000 can be stabilized before considering the subsequent trend, of course, the market has also started the expected fluctuations.
How to view altcoins? What can retail investors still buy?
The open interest of altcoins in this round of the market has seen an explosive growth, and the growth rate has far exceeded that of Bitcoin. Although the massive liquidations in December have led to a decrease of nearly $10 billion in the size of open positions, the current size of open positions is still about 40% higher than the peak of the March 2024 bull market. This reflects that altcoins are still the main direction of capital games;
Although the scale of altcoins has exceeded that of March 2024, and even reached the highest level in nearly 3 years, the peak of the weighted average funding rate of altcoins in this round is still far lower than that of March 2024. This indicates that the bullish sentiment in the market is still in a moderate state of fermentation.
Since Bitcoin's market cap dominance has fallen from its peak of 60%, the daily trading volume share of altcoins (excluding the top 10 by market cap) has remained above 40%, maintaining a dominant position. The reason why the altcoin market is perceived as sluggish is that the daily trading volume has plummeted from $300 billion to $150 billion, leading to a return to a situation of "too many monks and not enough porridge" in the market. In the context of a contraction in trading volume, capital is mainly moving in two directions: one is to concentrate on the coins with strong trend momentum, such as SUI, AAVE, XRP, etc.; the other is to gather on hot topics for speculation, such as AI Agent, DeSci, RWA, etc.
Since the market bottom on December 20, AI Agent has undoubtedly become the hottest topic in the market. Nearly half of the top gainers are related to AI Agent. The two flagship projects of AI Agent, Ai16z and Virtual, have also become the tokens with the strongest ability to attract capital in December 2024 without any suspense. As capital has already deeply entered this field, the AI Agent market is likely to continue for several months. To seek significant excess returns, it is still necessary to closely follow the market hotspots.
Of course, chasing Ai16z and Virtual at high prices is clearly not the best choice for current participation in the AI Agent market. On the contrary, for conservative investors, the second-tier projects that have already adjusted sufficiently, such as ACT and GOAT, are more likely to generate trading opportunities.
In the operation of altcoins, the opportunities mainly depend on individual risk preferences and return expectations.
For conservative investors, the platform tokens of leading exchanges still have relatively high safety margins, as their current valuations and growth prospects are still very good. At the same time, the pullbacks in the leaders of various sub-sectors also provide good opportunities for position-building, such as UNI, LINK (Chainlink), AAVE, and SSV in the DeFi sector.
