Bitcoin Plummets: Over 230,000 Liquidated, Fed Chair Powell Declares No Bitcoin Holdings

Bitcoin Plummets: Over 230,000 Liquidated, Fed Chair Powell Declares No Bitcoin HoldingsIn the early hours of December 19th, Bitcoin experienced a sharp drop, briefly falling below $100,000 and marking its largest single-day decline since August. This dramatic volatility sent shockwaves through the cryptocurrency market

Bitcoin Plummets: Over 230,000 Liquidated, Fed Chair Powell Declares No Bitcoin Holdings

In the early hours of December 19th, Bitcoin experienced a sharp drop, briefly falling below $100,000 and marking its largest single-day decline since August. This dramatic volatility sent shockwaves through the cryptocurrency market. Coinglass data revealed that 236,300 traders were liquidated within 24 hours, resulting in a staggering $672 million in losses. This event has sparked widespread concern and warrants a thorough examination of its underlying causes.

The Bitcoin price crash followed a record high of over $108,000 just the previous day, creating a stark contrast. This volatile swing underscores the extreme price fluctuations inherent in the cryptocurrency market. The liquidation event saw $570 million in long positions and $97.45 million in short positions liquidated. Besides Bitcoin, other major cryptocurrencies also suffered significant losses, with Ethereum, Dogecoin, and Cardano experiencing intraday declines exceeding 5%.

This Bitcoin plunge occurred against the backdrop of the Federal Reserve's latest interest rate decision. In the early hours of December 19th (Beijing time), the Fed announced a 25-basis-point cut to its federal funds rate target range, bringing it to 4.25%4.50%. This marked the third consecutive rate cut and aligned with market expectations. However, Fed Chair Jerome Powell made a crucial statement during the subsequent press conference: the Federal Reserve does not intend to hold Bitcoin and will not seek to amend relevant laws to allow for it.

Powell explicitly stated, "The Federal Reserve is not permitted to own Bitcoin. The Federal Reserve Act specifies what we can own, and we have no intention of seeking to change the law. That's something for Congress to consider, but the Federal Reserve is not seeking a change." This statement stands in sharp contrast to former President Trump's earlier pledge to implement pro-cryptocurrency policies upon taking office and to consider establishing a Bitcoin strategic reserve. Powell also indicated that the Fed's less restrictive policy would make it more cautious in further adjusting interest rates, hinting that the Fed is at or near the point of slowing rate cuts.

The Fed's rate cut decision and Powell's clear statement regarding Bitcoin significantly impacted market sentiment. Following the announcement, the US Dollar Index surged, and Bitcoin prices promptly plummeted. Zaheer Ebtikar, founder of cryptocurrency fund SplitCapital, analyzed that global markets are digesting expectations of a less dovish Fed in 2025, leading cryptocurrency event traders and market makers to reduce risk.

David Lawant, head of research at cryptocurrency prime brokerage FalconX, offered a more cautious perspective. He suggested that while current rate cut predictions are influencing prices, these effects won't be long-lasting, given the declining correlation between Bitcoin and major stock indices. Lawant noted that a slower pace of Fed rate cuts in 2025 wasn't entirely unexpected but did impact risk assets, including cryptocurrencies.

Lawant further added that while traditionally macroeconomic factors influence cryptocurrency price movements, industry-specific factors may become dominant in the coming weeks and months, especially with market anticipation of a new administration potentially altering policies. This suggests that beyond macroeconomic policies, internal cryptocurrency market factors and future policy directions will have a profound impact on price trends.

This Bitcoin crash once again highlights the risks and volatility inherent in the cryptocurrency market. The massive liquidations serve as a cautionary tale for investors, emphasizing the need for careful risk assessment, appropriate position sizing, and avoiding impulsive trading. Fed Chair Powell's clear statement against Bitcoin holdings further underscores regulatory bodies' cautious stance on cryptocurrencies. This event also reminds investors that changes in macroeconomic policies and the regulatory environment can significantly impact the cryptocurrency market.

The market needs time to digest the Fed's latest policy signals and Powell's comments on cryptocurrencies. In the short term, the cryptocurrency market may remain volatile, requiring investors to closely monitor market dynamics and develop cautious investment strategies. In the long term, the future of cryptocurrencies remains highly uncertain, requiring consideration of technological innovation, regulatory policies, and market demand. This event reinforces the importance of in-depth research and risk management in the cryptocurrency market. Investors should rationally assess market fluctuations, avoid blind following of trends, and make investment decisions based on their risk tolerance.

The Bitcoin crash and the Fed's statements introduce new variables into the future development of the cryptocurrency market. Market participants need to closely monitor relevant policy developments and adequately assess market risks to make informed investment decisions in this ever-changing environment. In the future, technological advancements, regulatory policies, and market demand will collectively shape the long-term trajectory of the cryptocurrency market. This event undoubtedly adds a new chapter to this complex and challenging market.

It must be emphasized that the above analysis is for informational purposes only and does not constitute investment advice. Investors should make independent judgments based on their own circumstances and bear the corresponding investment risks. Investing involves risk; please proceed with caution.