Crypto Market Crash: Overly Bullish Sentiment Blamed

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CRYPTOCURRENCY,MARKET CRASH,FED RESERVE

The cryptocurrency market experienced a significant crash, with Bitcoin and other major coins losing value for the third consecutive day. Traders at QCP Capital attributed the selloff to excessive bullish sentiment in the past month, with the Federal Reserve's hawkish stance and revised economic projections exacerbating the situation.

Traders at Singapore-based QCP Capital attributed the market crash to overly bullish sentiment in the past month. Losses in bitcoin (BTC) and other crypto majors extended to their third straight day, as risk-off behavior after this week’s FOMC meeting and general profit-taking contributed to heavy market sentiment. BTC dropped 4.2% in the past 24 hours, with Solana’s SOL, ether (ETH) and Cardano’s ADA falling as much as 9%.

Dogecoin slid the most with an 11% drop, extending weekly losses to over 21%. Reaction to a hawkish FOMC triggered a sharp selloff across all risk assets on Wednesday and Thursday. Nasdaq plummeted 3.5%, S&P 500 dropped 2.9% and BTC declined more than 6% since the meeting, where Fed chair Jerome Powell hinted at only a few rate cuts in 2025. Powell then said at a post-FOMC press conference that the central bank wasn’t allowed to own bitcoin under current regulations — in response to a question about President-elect Donald Trump’s strategic reserve promises. “While it is easy to blame the selloff on the Fed’s hawkish cut, we believe the root cause of the morning’s crash to be market’s overly bullish positioning,” QCP said in a Telegram broadcast. “Since the election, risk assets have enjoyed an impressive one-sided run, leaving the market extremely vulnerable to any shocks. While the Fed's 25bps cut was expected, the source of panic can be attributed to the dot plot, which was revised lower. Due to persistent inflation, the Fed now projects two rate cuts for 2025 compared to the market’s consensus of 3 rate cuts,” QCP added

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