The crypto market, once riding high on optimism just days ago, has entered the holiday season in a slump. Bitcoin, which reached its all-time high of $108,364 on December 17, 2024, is now trading at $94,416 as of 1:15 p.m. UTC on December 24. The total cryptocurrency market capitalization followed a similar trajectory, reaching an all-time high of $3.71 trillion on December 17 before falling to $3.24 trillion—a fall of 12.4% for both in than a week. This downturn, coupled with dashed hopes for a traditional Santa Claus rally, has left hundreds of millions of crypto investors around the world wondering: what went wrong?
The festive cheer surrounding the market wasn’t unwarranted. Bitcoin’s meteoric rise to its all-time high came as markets anticipated a pro-crypto Trump administration set to take power on January 20, 2025. Additionally, the departure of the anti-crypto SEC Chair, Gary Gensler, on the same day was seen as a boon for the digital asset industry. Many investors expected these developments to spark sustained momentum across the crypto market. However, the Federal Reserve’s December 18 policy announcement threw cold water on this optimism, serving as a “Grinch” that stole the crypto market’s holiday rally.
The Fed’s hawkish tone during its December 17–18 meeting was the turning point. While the central bank cut its benchmark interest rate by 0.25%, lowering it to a target range of 4.25%–4.50%, its accompanying messaging was far from dovish. Projections released after the meeting showed that policymakers expected only two additional rate cuts in 2025, down from four projected in September. This indicated that monetary policy would remain restrictive for longer than previously anticipated, dampening market sentiment across risk assets.
The crypto market, heavily reliant on liquidity and speculative sentiment, felt the impact almost immediately. Rising U.S. Treasury yields following the Fed’s announcement have created a challenging environment for cryptocurrencies. As of December 24, the 10-year Treasury note yield climbed to 4.61%, up from 4.44% on December 17, reflecting tighter financial conditions. These dynamics have put downward pressure on Bitcoin and the broader crypto market, overshadowing the optimism generated by political and regulatory developments.
Despite these setbacks, the crypto market remains resilient in many respects. Stablecoins, tokenized assets, and decentralized finance continue to grow, and the pro-crypto stance of the incoming administration offers hope for long-term progress. However, as the year comes to a close, the question remains: can the crypto market recover its festive cheer, or will 2025 begin under the shadow of macroeconomic uncertainty?
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