A crypto market crash happened in November, with the valuation of all tokens dropping by over 20%. This decline happened after the aftermath of the October 10th liquidation event. Bitcoin price dropped from a high of $126,300 in October to a low of $80,495, while most altcoins had a steeper dive. So, will the market crash or rally in December?
Why the Crypto market crash happened in November
The crypto market crashed in November, even as American stocks soared to a record high. The Nasdaq 100 and S&P 500 indices have jumped by double-digits in the past few months and are now hovering at their all-time high.
Analysts, including popular investors like Tom Lee and Arthur Hayes, believe that the crash happened after the aftermath of the $20 billion liquidations on October 10.
The liquidation event led to a sharp decline in futures open interest. Data compiled by CoinGlass showed that the open interest dropped by over 4.30% on Monday to $124 billion. Before the October 10 liquidation event, the open interest was over $250 billion.
Crypto prices tend to underperform the market whenever the futures open interest is in a downtrend. The crash in November also coincided with the rising liquidation as millions of crypto investors were wiped out.
Additionally, the crypto market crash happened as American investors dumped their Bitcoin and Ethereum assets. Data compiled by SoSoValue shows that spot Bitcoin ETF outflows rose to $3.45 billion in November after adding $6.9 billion in the previous two months. Total inflow now stands at $57.71 billion.
Spot Ethereum ETFs also shed over $1.42 billion in inflows, bucking a 7-month trend of inflows. These funds now have cumulative inflows of over $12.94 billion.
The crypto market crash also happened as the Crypto Fear and Index moved to the fear zone of 8, its lowest level this year. It is common for crypto prices to retreat when there is fear in the market. In most cases, however, the crypto market normally rebounds when the Fear and Greed Index moves to the extreme fear zone.
Potential catalysts for crypto prices in December
There are some potential catalysts for the crypto market in December. First, one potential catalyst for the crypto market is the Santa Claus rally, which is a situation where financial assets rebound towards Christmas.
Second, the crypto market rally may happen after the Federal Reserve delivers its interest rate decision on December 15. Analysts expect that the bank will deliver the third interest rate cut, bringing the benchmark rate to between 3.50% and 3.75%.
The initial rate cut will not be the main catalyst. Rather, investors will react to the forecast of what to expect in 2026. Signs that the bank will continue cutting rates will be bullish for the crypto market.
The other notable catalyst will be Donald Trump’s decision on who will be the next Federal Reserve chair, with most analysts expecting that it will be Kevin Hassett, who has supported aggressive rate cuts.
Meanwhile, cryptocurrencies may rebound because of the Crypto Fear and Greed Index, which has remained in the extreme fear zone zone. As CZ noted, it is always better to sell when there is maximum grees and buy when there is extreme fear.
Unpopular opinion, but it’s better to sell when there is maximum greed, and buy when there is maximum fear. 🤷♂️
The crypto market recovery may also be boosted by more ETF approvals. Some of the potential altcoins that may have their ETFs launched are popular names like Binance Coin (BNB), Cardano (ADA), Chainlink (LINK).
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