Analysts have not reached a clear consensus on what exactly triggered Monday’s sector weakness, but many point to mainly technical factors: the initial liquidation of several large positions set off a domino effect, bringing the total notional wiped out to roughly 646.0 million dollars, with about 90.0% of that coming from long positions. Additional pressure came from the hack of DeFi platform Yearn Finance: according to the team, attackers managed to drain around 9.0 million dollars in assets, while 1,000 ETH (about 3.0 million dollars) were routed through mixing service Tornado Cash. Over the weekend, representatives of the People’s Bank of China reiterated that virtual currencies do not have the same legal status as fiat money, are not legal tender and cannot be used as currency in the market, adding that the regulator will continue to crack down on their use.
The rebound in prices was supported by monetary factors and rising expectations of Federal Reserve policy easing at the December 10 meeting, reinforced by November labor-market data from Automatic Data Processing (ADP). The reported decline of 32,000 jobs signals a cooling labor market and underlines the need for additional support.
The crypto community is also reacting positively to the potential appointment of White House economic adviser Kevin Hassett as the next Fed Chair, after his nomination by President Donald Trump. Hassett is viewed as friendly toward the digital-asset industry, reportedly holding around 1.0 million dollars worth of Coinbase stock, and is an advocate of lower interest rates, which would strengthen the relative appeal of alternative assets versus the dollar. It is also worth noting that the U.S. Commodity Futures Trading Commission (CFTC) has approved the launch of spot crypto products on federally regulated futures exchanges. Acting CFTC Chair Caroline Pham stated that this step followed recommendations from the President’s Working Group.
Despite the latest bounce, investor enthusiasm remains muted. This is reflected in continued outflows from major digital-asset investment ETFs and the Crypto Fear & Greed Index staying in the “Fear” zone at 28. Next week, most leading cryptocurrencies may shift into a consolidation phase or resume a downside move.