Bitcoin defies equity downturn as global markets digest Fed’s bearish 2025 rate cut projections: K33 Research
2024-12-31
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Bitcoin has held above the $95,000 mark despite a downturn in global equity indices, as markets process the Dec. 18 Federal Open Market Committee (FOMC) meeting, where Federal Reserve Chair Jerome Powell indicated a slower pace of monetary easing in 2025, analysts say.
On a weekly basis, however, the largest digital asset by market capitalization has declined alongside major equity indices. "The past two weeks following the FOMC have been met by global de-risking, and bitcoin has faced negative two-week returns of 11%, whereas ether has declined by 15%, pushing the ETH/BTC down toward 0.036,"K33 Head of Research Vetle Lunde said.
In a K33 Research report on Tuesday, Vetle suggested the current bitcoin drawdown has been strongly correlated to global equity markets. The digital asset’s 30-day correlation to the Nasdaq has pushed above 0.50 for the first time since late September.
Risk-asset downtrend after December's FOMC meeting
"While the Fed has cut rates by 100 basis-points since September, the 10-year treasury note has grown by 100 basis-points, signaling that the market anticipates inflationary impulses ahead," Vetle said. He noted that bitcoin has experienced significant exchange-traded fund (ETF) outflows and more restrained purchases by MicroStrategy following the FOMC meeting.
These factors have dampened bitcoin's momentum since mid-December, disrupting the uptrend established from Nov. 5. The digital asset has since found support at its Nov. 26 low of $91,000.
Slump in trading activity over the Christmas holidays
QCP Capital analysts observed that bitcoin spot trading has been notably volatile over the Christmas period due to reduced liquidity. "Any upside recovery over the past couple of days has been capped by persistent selling pressure," the analysts said. "Momentum in bitcoin has clearly fizzled as the year ends, with $1.8 billion of net outflows from spot ETFs since Dec. 19."
The analysts also highlighted that the weak performance in crypto reflects broader market sentiment. Both the S&P 500 and Nasdaq have recorded their third drop of around 1% in eight sessions as markets grapple with heightened uncertainty over global trade heading into 2025.
According to K33 Research, trading volumes across all major exchanges have declined to pre-election levels during the holiday season. "Seven-day average daily spot volumes currently sit at $3.4 billion, the lowest recorded seven-day volume since Nov. 5," Lunde said.
K33 Research data highlighted that the slow trading volume during the winter holidays is typical for bitcoin. However, this year, the Christmas lull has been amplified by trading holidays in exchange-traded funds (ETFs) and reduced activity on the CME. "Further, MicroStrategy’s softened bitcoin purchases have further pulled volumes into a more docile terrain," Lunde added.
MicroStrategy (MSTR) shares fell below $300 during after-hours trading on Monday, down 46% from their all-time high in November. The decline follows the company’s proposal to increase its stock shares by billions to support its $42 billion funding strategy amid concerns.
Bitcoin is now changing hands for around $95,300 mark on Tuesday, a slight increase of around 3% over the past 24 hours, according to The Block's price page.
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