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<p class="is-style-lead">It was a sea of red in the crypto industry as Bitcoin price dropped below $100,000 briefly and the crypto fear and greed index moved from the extreme greed zone of 88 to 69. So, why did crypto crash this week?</p> 
<p>Bitcoin (<a rel="" href="https://crypto.news/price/bitcoin/">BTC</a>), he largest cryptocurrency, was trading at $102,300 on Dec. 19, while Ethereum (<a rel="" href="https://crypto.news/price/ethereum/">ETH</a>) dropped to $3,600. Some of the top laggards were coins like Cosmis, Floki, THORChain, Curve DAO Token, and Fantom.</p> 
<h2 class="wp-block-heading" id="crypto-crashed-because-of-the-fed-decision">Crypto crashed because of the Fed decision</h2> 
<p>The most important reason why the crypto crash happened is the <a rel="" href="https://crypto.news/heres-how-the-crypto-market-reacted-to-the-feds-0-25-cut/">Federal Reserve decision</a>. The bank decided to cut interest rates by 0.25% as was widely expected. That cut brought the cumulative cuts this year to 1%.</p> 
<p>However, the Fed signaled that it would only implement two additional cuts in 2025, citing its focus on controlling inflation. Officials expect inflation to remain persistently high, reaching the 2% target only in 2026 or 2027.</p> 
<p>The hawkish tone from the Fed led to declines in cryptocurrencies and other risk assets. U.S. equity markets plunged, with the Dow Jones and Nasdaq 100 indices falling over 2%. U.S. Treasury yields surged to multi-month highs, with the 10-year yield rising to 4.557% and the 30-year yield climbing to 4.7%. Meanwhile, the U.S. dollar index soared to a two-year high.</p> 
<p> You might also like: <a rel="" href="https://crypto.news/bitcoin-price-may-see-a-harsh-reversal-after-fed-decision/"> Bitcoin price may see a harsh reversal after Fed decision </a> </p> 
<h2 class="wp-block-heading" id="mean-reversion-and-distribution">Mean reversion and distribution</h2> 
<p>Crypto is also down because of profit-taking, panic, mean reversion, and the Wyckoff Method distribution.</p> 
<p>Historically, crypto investors take profits when Bitcoin and other tokens rally too much. This profit-taking can be explained in terms of mean reversion and the Wyckoff Method.</p> 
<p>Mean reversion is a situation where an asset in an uptrend falls so that it can move close to its historical averages. For example, as shown below, Solana remains about 20% above the 200-day moving average. As such, it may drop to get closer to that level.</p> 
<figure class="wp-block-image size-full">
 <img loading="lazy" decoding="async" width="3574" height="1982" src="https://crypto.news/app/uploads/2024/12/Solana-Crypto-Price.png" alt="Solana Crypto Price" class="wp-image-14320787">
 <figcaption class="wp-element-caption">
  Solana price chart | Source: <a href="https://crypto.news/price/solana/" target="_blank">crypto.news</a>
 </figcaption>
</figure> 
<p>The Wyckoff Method identifies key phases in an asset’s lifecycle: accumulation, markup, distribution, and markdown. The recent crypto surge was part of the markup phase, while the ongoing decline could signify either a distribution phase or the start of markdown.</p> 
<p> You might also like: <a rel="" href="https://crypto.news/heres-how-the-crypto-market-reacted-to-the-feds-0-25-cut/"> Here’s how the crypto market reacted to the Fed’s 0.25% cut </a> </p> 
<h2 class="wp-block-heading" id="will-crypto-prices-bounce-back">Will crypto prices bounce back?</h2> 
<p>Cryptocurrency prices often mirror Bitcoin’s movements. As previously noted, Bitcoin’s cup-and-handle pattern indicates the potential for a <a href="https://crypto.news/bitcoin-price-can-hit-200k-in-2025-but-crossing-122k-will-be-crucial/" target="_blank">rally to $122,000</a> in the near term. If this happens, it could trigger a recovery across altcoins as investors capitalize on the dip.</p> 
<p>However, the immediate aftermath of a dip may lead to a “dead cat bounce,” where an asset experiencing a significant decline temporarily recovers before resuming its downtrend.</p>

2 reasons why Bitcoin and other crypto just crashed

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