Daily News | Fed's Hawkish Rate Cut Triggers Market Drop, Altcoin Season Still Awaits BTC Dominance Pullback

2024-12-20, 03:17

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##Daily Summary: BTC ETF Sees Rare Large Outflow, Market Still in Greed Zone
According to Farside Investors, the U.S. <a href="/id/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> spot ETF saw a net outflow of $671 million yesterday. Among these, Fidelity’s FBTC saw an outflow of $208 million, Grayscale’s BTC saw an outflow of $188 million, and BlackRock’s data has yet to be updated.

###The U.S. Ethereum spot ETF saw a net outflow of $60 million, with Bitwise ETHW and Grayscale ETHE seeing outflows of $6.8 million and $58.1 million, respectively. BlackRock’s ETHA data is also pending.
Crypto Fear and Greed Index Falls to 74, Market Still in Greed
According to Alternative.me, the Crypto Fear and Greed Index dropped to 74 today (from 75 yesterday), indicating that although market enthusiasm has cooled slightly, it remains in a "greed" zone.

(Note: The Fear and Greed Index reads 0-100, and is calculated based on several factors, including volatility (25%), market volume (25%), social media sentiment (15%), surveys (15%), Bitcoin’s market dominance (10%), and Google Trends (10%).)
###VIX Index Soars 74%, Signaling Bitcoin May Have Hit a Local Bottom
According to CoinDesk, the CBOE Volatility Index (VIX) surged 74% yesterday, marking the largest single-day increase since February 2018 and the second highest in history. This spike was caused by the Fed’s 25bps rate cut and hawkish comments from Jerome Powell, triggering market panic. <a href="/id/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> briefly dropped below $100,000, while U.S. stocks fell about 3%.

Historically, sharp rises in the VIX often signal that Bitcoin has reached a local bottom. For example, after the VIX surged 116% in February 2018, Bitcoin rebounded from $6,891 to over $11,000. Similarly, in August 2024, when the VIX rose 65%, Bitcoin rebounded from $54,000 to $64,000.

###Top Trader Eugene: Currently Focused on SOL Among Major Coins
Top trader Eugene Ng Ah Sio explained why he is currently focusing on SOL among major coins:

"1.On all charts (SOLBTC, SOLETH, and SOLUSD), we are at or near the 'value' levels on higher time frames (HTF).

2.The current valuation under $200 presents a good entry point for bulls today.

3.The funding rate has been decreasing and is now negative, indicating that some form of perpetual contract hedging is taking place, as open interest (OI) has hardly changed. This suggests that multiple market participants are using SOL for hedging in short positions due to weakened momentum since SOL peaked at $260."

As @docXBT mentioned, these are important levels to respect, especially on higher time frames. As a bull, I’m willing to enter at these levels. However, if these levels fail to hold, we could quickly enter a risky zone."

Previously, Eugene Ng Ah Sio posted that he "rebalanced his portfolio and is now fully bullish on SOL. He has lost about $1 million on meme coins and is now looking for a rebound opportunity."
##Market Analysis: USUAL Surges Over 50%, Altcoins Drop Over 20%
**Highlights:**
-USUAL defied the trend and surged over 50%, leading the market. Usual Labs is a stablecoin protocol, and its stablecoin product, USD0, is a "collateralized stablecoin" backed by government debt bonds (also known as sovereign bonds). Due to the use of M0 as collateral, it’s called "USD0". Since launching in late August, USD0’s circulating supply has grown to $1.2 billion. From December 19th to today, the circulating supply of USD0 has increased by over $200 million. USUAL’s current market cap is $600 million, with a fully diluted valuation (FDV) of $5.5 billion.

-Layer2 protocols MOVE and SCR have risen, with MOVE leading the day with a 30% increase. MOVE currently has a market cap of $1.88 billion, ranking 60th in the market, still far behind popular Layer2 tokens like ARB and OP.

**General Trends:**
-BTC has fallen for three consecutive days, with rare large outflows from BTC ETFs. The market will likely consolidate at lower levels in the short term, but in the medium to long term, BTC's price remains at a bottom.

-ETH dropped below $3,400, falling for four consecutive days, heavily affected by the broader market downturn.

-Altcoins are generally down, with most altcoins experiencing over 20% losses within the day. The altcoin season is still on hold, and we might need to wait for a BTC dominance pullback before it can begin.
##Macro News: U.S. Stock Indices Fluctuate as Market Adjusts to Fed’s Hawkish Stance
U.S. stock indices had mixed results: the S&P 500 dropped 0.09% to 5,867.08, the Dow Jones rose 0.04% to 42,342.24, and the Nasdaq fell 0.10% to 19,372.77. The 10-year U.S. Treasury yield is at 4.57%, and the 2-year yield, which is most sensitive to Fed policy, is at 4.32%.

Following the Fed’s hawkish rate cut and forecast to slow down easing next year, long-term U.S. Treasury bonds weakened on Thursday, and the yield curve steepened to its steepest level in about 30 months. The 2-year Treasury yield fell by 6bps to 4.295%, while the 10-year yield rose by 4bps to 4.56%, hovering at the highest level since May. The 2-year yield is now 0.26 percentage points below the 10-year yield. The steepening of the yield curve is attributed to inflation persistence and economic resilience, making investors reluctant to hold long-term bonds.
Ian Lyngen, Head of U.S. Rate Strategy at BMO Capital Markets, noted that "the weakness in long-term bonds is due to the Fed's hawkish stance and pressures from the growing supply of Treasury bonds. The trend of a steeper yield curve will likely continue through 2024."

<div class="blog-details-info">
<div>Author:** icing**, Gate.io Researcher
<div>Translator: Sally
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.All investments carry inherent risks; prudent decision-making is essential.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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