As a seasoned researcher with over two decades of experience in financial markets, I have seen my fair share of market turbulence and volatility. The recent dip in Bitcoin (BTC) price, retesting December lows, is reminiscent of the wild west days of the early 2010s when cryptocurrencies were still finding their footing.
After the opening of Wall Street on December 20th, Bitcoin (BTC) appeared to find respite as a massive unwinding of leveraged positions persisted, causing distress among late investors.
BTC price retests December lows in leverage wipeout
Data from CryptoMoon Markets Pro and TradingView showed BTC/USD recovering past $96,000 on Bitstamp.
Today has been a tough day for me as an analyst, with Bitcoin experiencing a 1.5% drop. The trading conditions were indeed challenging, and it appears that long-term investors are bearing the brunt of this decline as the market dipped back towards the $92,000 levels we saw earlier in December.
Rekt Capital, a renowned trader and analyst, noted in today’s market analysis on X that the anticipated chain of backing away from support has taken place.
“Bitcoin is now down -15% on this pullback.”
As a researcher studying market trends, I’ve previously pointed out that Bitcoin tends to experience corrections following a bull market, roughly six to eight weeks after reaching new all-time highs. Interestingly, the recent price drop appears to align with a comparable occurrence seen in 2021.
“They tend to last a few weeks,” he continued.
“Also, there tend to be up to 4 Price Discovery Corrections at most until a Bull Market ends. This is first Price Discovery Correction in this cycle, Which means it is an optimal re-accumulation opportunity with a high probability of price reversal to the upside.”
According to recent updates from our tracking tool, CoinGlass, a total of approximately $1.4 billion in crypto assets were liquidated across all markets over the last 24 hours.
Investigating the reason behind Bitcoin’s temporary price drop in the short term, J.A. Maartunn, who contributes to the on-chain analysis platform CryptoQuant, attributed the cause to the United States.
Sell-side pressure was particularly noticeable on largest US exchange Coinbase, he revealed on X.
A chart provided alongside demonstrated that the Coinbase premium, which refers to the gap in Bitcoin’s price on Coinbase compared to Binance, was consistently lower (negative), meaning Bitcoin was priced lower on Coinbase than on Binance.
“When Coinbase Premium is negative = Just stay in the side lines, wait for the market to show signals,” fellow CryptoQuant contributor BQYoutube recommended in one of the platform’s Quicktake blog posts.
“When Coinbase Premium turns positive = Comeback to the market trade and hold.”
Bitcoin, crypto welcome lower PCE inflation print
Macro conditions meanwhile benefited from cooler US inflation data on the day.
The Personal Consumption Expenditures (PCE) index, known as the “preferred” inflation gauge for the Federal Reserve, came in below expectations at 2.4% versus 2.5%, respectively.
In a portion of their analysis, The Kobeissi Letter stated that although the Personal Consumption Expenditures (PCE) inflation rate increased more than usual, it did not rise as much as anticipated, offering some alleviation to the markets.
“Still, it’s further confirmation that inflation is back on the rise. Expect a bumpy road ahead.”
The outcome exerted a relatively slight influence on forecasts regarding the Fed’s future actions. According to data from CME Group’s FedWatch Tool, the probability of another rate reduction during the January meeting of the Federal Open Market Committee (FOMC) stands at 10.7%, compared to 8.6% the day before.
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2024-12-20 18:53