The Recent Price Drop and Its Implications
The Three Consecutive Red Candles
Bitcoin’s BTC daily chart has produced three consecutive red candles for the first time since the lead-up period to Donald Trump’s US election victory. This coincidental timing has raised questions about the broader market sentiment, particularly among crypto enthusiasts. Traders have noted that Bitcoin retested the 50-day EMA level in this period, a significant technical indicator. As of December 20, Bitcoin’s price had dropped by over 15% since its all-time high, prompting analysts to assess whether the decline is over or if further corrections are imminent.
Analyst Opinions on Bitcoin’s Decline
One analyst posited that most of the drawdown is potentially over for Bitcoin. With BTC falling to $93,000 on December 20, they argued that a correction was approaching its conclusion. This analyst highlighted that the current decline could be attributed to a massive bearish divergence between Bitcoin’s price and its relative strength index (RSI) over the past month. Such divergences are typically followed by an 8% to 10% retracement, a phenomenon referred to as a "healthy reset."
Bitcoin’s Recovery Potential
Another analyst, Captain Faibik, suggested that Bitcoin might rebound from the $94,000 range based on historical price patterns. This analysis was further supported by an X post from Faibik, which charted potential support levels for Bitcoin in this price zone.
The Shiller Factor: A Closer Look
In contrast to Captain Faibik’s optimism, anonymous crypto trader Cold Blooded Shiller expressed a more pessimistic outlook. Shiller suggested that a deeper pullback might occur, drawing parallels between the current price action and January 2024. If this scenario unfolds, Bitcoin’s sell-off could extend down to as low as $85,000.
Selling Pressure: Spot vs. Futures Markets
Byzantine General, a futures market analyst, highlighted that spot holders were actively selling Bitcoin in response to market sentiment. They pointed out that the spot market was disconnections from the derivatives market due to this selling pressure. Maartunn of CryptoQuant added that Coinbase’s premium had fallen to a quarterly low, indicating significant selling activity by institutional players.
The Scale of Selling: Volume and Losses
The volume of realized losses reached $28.9 million in 5 days, exceeding Bitcoin’s weekly average by 320%. This spike in losses coincided with an analysis by Axel Adler Jr., a Bitcoin onchain analyst, who noted that the realized loss over the past five days was 28 million, marking a significant departure from pre-2024 levels.
Mid-Term Chart Analysis
Analyzing Bitcoin’s mid-term price action revealed bearish breakouts and corrections. However, the absence of a reversal signal at the $95,000 level has prompted some analysts to view this as an entry point for long positions. The chart’s resistance is expected to be tested near this crucial level.
Final Thoughts on Bitcoin’s Future
Given the technical indicators, market sentiment, and the potential support levels identified in this analysis, Bitcoin appears to be in a vulnerable position. While the decline may have been over, external factors such as geopolitical tensions and institutional selling could weigh on the cryptocurrency’s price further. Investors should remain vigilant, closely monitoring key support/resistance levels and broader market developments.
Conclusion
Bitcoin’s recent price action reflects a complex interplay of technical indicators, market sentiment, and external factors. As the market approaches critical levels, traders and investors must stay informed about potential reversals and manage their positions prudently in light of the current macroeconomic environment.
