- Bitcoin reached a record high of $108,000 on December 17, before retreating to $92,000 by December 20.
- Federal Reserve’s smaller-than-expected rate cut announcement triggered a market correction.
- Reduced Bitcoin supply on exchanges contributed to the price surge due to increased scarcity.
- Short position liquidations amplified buying pressure during the rally.
- Analysts predict potential further price appreciation despite correlation with traditional markets.
Bitcoin’s meteoric rise to $108,000 marked a historic milestone this week, followed by a sharp correction to $92,000 as investors responded to the Federal Reserve’s cautious monetary policy stance. The cryptocurrency’s price movement reflected a complex interplay of market dynamics, regulatory developments, and macroeconomic factors.
Supply Dynamics and Market Forces
According to Coinbase%3ABTCUSD”>Coinbase data from TradingView, Bitcoin’s upward trajectory began with successive records on December 16 and 17. Alex Lin, cofounder of Reforge, attributes the rally to decreased Bitcoin availability on exchanges, indicating investors’ preference for self-custody.
The price surge triggered a chain reaction in derivatives markets:
- Short sellers faced forced position closures
- Liquidations created additional buying momentum
- Market sentiment strengthened above the $100,000 level
Federal Reserve Impact
The Federal Reserve’s announcement of a 25-basis-point rate reduction proved less aggressive than market expectations. Greg Magadini, derivatives director at Amberdata, noted that strong CPI data and labor market conditions influenced the Fed’s more conservative approach.
Brady Swenson of Swan Bitcoin highlighted how these developments underscore Bitcoin’s appeal as a transparent, code-based monetary system compared to traditional policy-making processes.
Tim Enneking, managing partner at Psalion, remains optimistic about Bitcoin’s prospects: "With a wipeout back to the low 90s, the stage is now really set well for another leg up." He emphasized that Bitcoin’s 24/7 trading nature provides additional opportunities compared to traditional markets’ limited trading hours.
Disclosure: The reporter owns positions in bitcoin, Bitcoin Cash, Litecoin, ether, EOS and SOL.
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