As someone who has been closely following and investing in the cryptocurrency market for several years now, I find myself both intrigued and cautious about the current state of affairs. The recent market fluctuations have left many investors feeling anxious, but as we all know, fear and greed are often the most powerful emotions driving market behavior.
Starting the Christmas week, Bitcoin (BTC) finds itself at a critical juncture with bears on the prowl, as the price support weakens and analysts predict a potential significant drop.
- A “bearish engulfing” on weekly timeframes makes traders nervous over the short-term outlook for BTC/USD.
- Targets for a possible deeper correction include a return to near old all-time highs of $74,000.
- US jobs data lead a quiet macro week, but markets are still reeling from last week’s hawkish Fed meeting.
- Those looking to gain long-term BTC exposure get their first buy-in opportunity in two months, per data from a dedicated indicator.
- Crypto market sentiment is rapidly souring, but “greed” still reigns.
Bitcoin suffers “bear engulfing” on weekly close
Following a weak ending to the week, Bitcoin is finding it difficult to maintain its position within the $90,000 price range as the holiday season approaches.
Data from CryptoMoon Markets Pro and TradingView paints an uncertain picture for BTC price action, with BTC/USD still down $13,000 from last week’s all-time highs.
In simpler terms, Rekt Capital stated that Bitcoin recently showed signs of a Bearish Engulfing pattern on its weekly chart, which is often interpreted as a bearish signal by traders.
Rekt Capital indicated that Bitcoin’s price against the U.S. dollar no longer holds its weekly support level, suggesting the conclusion of a five-week upward trend.
The post cautions that Bitcoin might be moving towards a prolonged period of decline over the next few weeks.
“Any relief rally, if at all needed, into these old supports could turn them into new resistance to confirm additional downside continuation.”
Others entertained the idea of a drop to old all-time highs from March at a now-distant $74,000.
In previous market cycles, it was typical for a dip of approximately 30% to occur during a bull run, as pointed out by trader Josh Rager in a recent post on December 23.
“This current price action hasn’t been fantastic but it also hasnt been awful. Imagine pulling back to $75k right now for a -30% pullback.”
Jelle, another trader, looked at the Bitcoin price trends from last year as a guide and forecasted that we might see an upward trend again following “a couple of more challenging weeks.
In the meantime, Charles Edwards, the founder of Capriole Investments – a quantitative Bitcoin and digital asset fund, pointed out that historically, December 26th has been a particularly strong day for the performance of the S&P 500.
He shared with X followers that traditionally, the 26th tends to be the day with the greatest returns throughout the year, based on historical data provided by Carson.
“X-mas relief bounce coming?”
$80,000 looms as short-term BTC price target
Vacation times can present fresh hurdles for cryptocurrency traders due to the extended duration of after-hours trades.
On weekends, when the usual liquidity profile isn’t present, market movements may become more pronounced or intense.
According to a comprehensive analysis by well-known trader and analyst Mark Cullen, there are two significant points to keep an eye on in the liquidity terrain across exchanges as we approach 2025. One of these levels could prove challenging for investors betting on continued price increases (bulls).
He stated that there’s a significant amount of liquidity, similar to gifts piled up under a Christmas tree, both at the 115k level and below 80k, based on his analysis using CoinGlass as a monitoring tool, regarding the X market.
“The big question: Which level gets hit first? And will we see a festive swing where both levels get a run?”
The accompanying chart shows two areas where liquidations would likely occur en masse should spot price reach them.
In simpler terms, if Bitcoin drops to $80,000, it would be considered a typical correction within the context of past Bitcoin price trends, as opposed to a major downturn.
According to a report by CryptoMoon, significant drops of around 20% or greater have often preceded Bitcoin reaching its prior record highs. Interestingly, Glassnode’s analysis shows that this current market cycle has seen lower volatility compared to previous ones.
According to Glassnode’s recent post, the steepest decline during this market cycle was a drop of 32%, which occurred on August 5, 2024. Typically, corrections are only around 25% below their highest local points, indicating robust demand for exchange-traded funds (ETFs) and growing institutional interest.
BTC price could drop $20,000 in macro liquidity crunch
In the coming week, there won’t be many major economic reports released, which means traders may experience reduced chances of sudden fluctuations in risk assets due to unexpected inflation changes.
Nonetheless, the U.S. will continue to reveal its initial jobless claims on December 26th. This particular event has shown a significant impact on the crypto market this year.
Currently, the overall weather pattern of our economy (macro climate) appears to be unpredictable. Just recently, the Federal Reserve decided to decrease interest rates by an anticipated 0.25%, but at the same time, they adopted a somewhat aggressive stance regarding economic policy in 2025.
The result was a risk-asset knockdown which included Bitcoin and altcoins, with markets seeing less chance of further rate cuts going forward in a potential blow to liquidity.
Discussing the subject at hand, The Kobeissi Letter identified a challenge regarding liquidity for Bitcoin specifically within the trading resources.
Previously, the value of Bitcoin has tended to mirror global money supply with a delay of approximately 10 weeks, as stated over the weekend on platform X.
“As global money supply hit a new record of $108.5 trillion in October, Bitcoin prices reached an all-time high of $108,000. Over the last 2 months, however, money supply has dropped by $4.1 trillion, to $104.4 trillion, the lowest since August.”
Kobeissi predicted that the ongoing bull market for Bitcoin (BTC) might temporarily halt, potentially leading to a more substantial price drop.
Should the current trend persist, it indicates a possible drop in Bitcoin’s price by around $20,000 within the coming weeks.
Regarding the subject of risky investments in particular, Kobeissi mentioned that they anticipate volatility to persist through the upcoming week.
According to CryptoMoon’s report, there is a growing belief among some analysts that January could initiate a significant drop in Bitcoin’s price.
Bitcoin DCA signal flashes after two-months
Following a two-month hiatus, the Bitcoin market activity is back at levels suggested by a persistent buy signal as per the dedicated indicator.
The so-called Smart DCA tool from onchain analytics platform CryptoQuant highlights when BTC/USD is trading below its short-term realized price.
In simpler terms, the realized price is the total cost when all the supply was last traded. Smart DCA (Dollar Cost Averaging) identifies relatively cheaper prices by considering transactions that took place within a week to a month before the current date. This could potentially present beneficial purchasing chances.
Dollar-cost averaging (DCA) is simply the method of investing a fixed amount of dollars into Bitcoin on a recurring basis.
According to a post on the CryptoQuant blog by Darkfost over the weekend, when Bitcoin (BTC) is priced at around $95,000, it creates a “suitable range for executing a Dollar-Cost Average (DCA) strategy.
Using a DCA (Dollar-Cost Averaging) method can help minimize the effects of price fluctuations and lower potential risks. It’s a sensible choice to consider under varying market circumstances,” he clarified.
“This tool, when used alongside an understanding of broader market trends and sentiment, can deliver valuable insights for making informed investment decisions.”
Previously, we at CryptoMoon highlighted an alternative signal suggesting Bitcoin holders should consider selling when the profitability of holding BTC surpasses a specific threshold.
“Severe FUD” impacts sentiment
Bitcoin sentiment arguably took an even greater beating than the price during last week’s liquidity flush — but research argues that that could ultimately benefit bulls.
On December 22nd, I unveiled some intriguing findings from our research firm, Santiment. We highlighted a significant surge in negative sentiment, or Fear, Uncertainty, and Doubt (FUD), among social media users, which we identified as the most intense FUD spiral of the year.
By examining discussions on platforms such as X, Reddit, Telegram, and 4Chan, Santiment found that approximately five pessimistic market comments were expressed for every four optimistic ones.
Further decline in Cryptocurrencies has driven Bitcoin’s public opinion to its most pessimistic statistical level this year, as stated in the accompanying analysis.
“Vocal traders are now showing severe FUD, and that’s good news for contrarians who know markets move the opposite direction of retail’s expectations.”
A chart highlighted similar situations in 2024, all coinciding with market rebounds.
Currently, the Crypto Fear & Greed Index, which gauges trader sentiment by analyzing various factors, continues to indicate “high greed.
On November 22nd, the Index reached a high of 94 out of 100, a point in history associated with potential market reversals going downwards. That day, Bitcoin’s value against the U.S. dollar closed approximately at $99,000.
The last time that “greed” was so prevalent among traders was in February 2021.
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2024-12-23 11:32