Bitcoin (BTC) started the Christmas week in a bearish crossroads as BTC price support thinned and forecasters saw the possibility of a sharp decline.
A “bearish engulfing” pattern on the weekly timeframe has traders worried about the short-term outlook of the BTC/USD pair.
The target for a deeper correction could be a return to near the old all-time high of $74k.
US jobs data led a quiet macro week, but markets are still reeling from last week's dovish Fed meeting.
Those looking to take long exposure to BTC have their first buying opportunity in two months, according to data from a dedicated indicator.
Cryptocurrency market sentiment is rapidly deteriorating, but “greed” still rules.
Bitcoin suffers ‘bearish’ close at weekly close
After a dismal week of closing, Bitcoin is struggling to maintain support in the $90k region as the holidays approach.
BTC/USD 1-hour chart. Source: TinTucBitcoin/TradingView
Data from TinTucBitcoin and TradingView paint an uncertain picture for BTC price action, with BTC/USD still down $13k from last week’s all-time high.
“Bitcoin has confirmed a Bearish Engulfing candlestick pattern,” popular trader and analyst Rekt Capital wrote in a latest post on X, this time for the weekly chart.
BTC/USD 1-week chart. Source: Rekt Capital/X
Rekt Capital warns that the BTC/USD pair has “lost” weekly support, marking the end of a five-week uptrend.
“Bitcoin is showing increasing signs of moving into a multi-week correction,” another post warned.
“Any recovery, if necessary, into these old supports could turn them into new resistance to confirm the continuation of the downtrend.”
BTC/USD 1-week chart. Source: Rekt Capital/X
Some have argued that the possibility of a drop to the old all-time highs from March at $74k is now remote.
“In previous cycles, a -30% drawdown has been the norm in bull markets,” trader Josh Rager noted in part of a Dec. 23 X post.
“The price action right now is not great but not too bad either. Imagine if it dropped to $75k right now.”
BTC/USD periodic candlestick chart. Source: Jelle/X
Fellow trader Jelle compared BTC price action last year to predict a potential bounce after “another tough few weeks.”
See also: Selling Bitcoin: A major strategic mistake of the US government?
For some short-term hope, Charles Edwards, founder of digital asset fund Capriole, revealed that December 26 is typically a high-performing day each year for the S&P 500.
“The 26th is traditionally the most profitable day of the year,” he told X followers, along with data from Carson.
“X-mas recovery could be coming?”
BTC Price Short Term Target is $80k
The holiday period brings new challenges to cryptocurrency market participants thanks to the extended period of “after-hours” trading.
The absence of the usual liquidity profile available on business days can exacerbate bullish or bearish moves.
Taking a look at the overall liquidity landscape across exchanges, prominent trader Mark Cullen now sees two key levels to watch through 2025. One will be painful for bulls.
“Liquidity is piling up like presents under the Christmas tree at 115K and below 80K,” he summarized on X with data from monitoring resource CoinGlass.
“The big question: Which level will be hit first? And will we see a festive swing where both levels are penetrated?”
BTC/USD chart with order book liquidity data. Source: Mark Cullen/X
The attached chart shows two areas where liquidation could occur en masse if the spot price were to reach them.
A drop to $80k would be a normal bull market correction compared to previous BTC price cycles.
As TinTucBitcoin reported, drops of 20% or more have characterized Bitcoin’s journey to previous all-time highs, with on-chain analytics firm Glassnode revealing that this cycle has been generally less volatile than in the past.
“The deepest drop in this cycle was -32% (August 5, 2024), with most corrections just below -25% from local highs, reflecting spot ETF demand and growing institutional interest,” Glassnode noted in part of a post on X over the weekend.
See also: Australia tightens crypto ATMs: Money laundering risk increases
Bitcoin Bull Market Bearish Chart. Source: Glassnode/X
BTC Price Could Drop 20K in Macro Liquidity Crisis
With a quiet week ahead for macroeconomic indicators, traders face little risk of volatility in risk assets due to an inflation surprise.
That said, December 26 will still see the release of initial jobless claims in the US — an event that the crypto market has been particularly sensitive to this year.
The macro climate, in general, is once again uncertain. Last week, the Federal Reserve cut interest rates to 0.25% as expected while expressing a strongly bearish stance through 2025.
The result has been a decline in risk assets including Bitcoin and altcoins, with the market seeing less chance of a rate cut in the near term, which could weaken liquidity.
On the subject, trading resource The Kobeissi Letter saw another liquidity barrier for Bitcoin in particular.
“Historically, Bitcoin price has closely followed global money supply with a lag of about 10 weeks,” it wrote on X over the weekend.
“As the global money supply hit a record $108.5 trillion in October, the price of Bitcoin hit an all-time high of $108,000. Over the past two months, however, the money supply has fallen by $4.1 trillion, to $104.4 trillion, its lowest level since August.”
BTC/USD vs. Global Money Supply M2. Source: The Kobeissi Letter/X
Kobeissi warned that the BTC/USD pair could “pause” in its bull market and even see a heavier correction next.
“If the relationship persists, this suggests Bitcoin price could drop to $20K in the coming weeks,” it continued.
Speaking on the topic of risk assets in general, Kobeissi added that it expects volatility to “carry over” into the coming week.
As TinTucBitcoin reported, others also see January as likely to cause a major BTC price correction.
Bitcoin DCA Signal Shines After Two Months
After a two-month absence, BTC price action has returned to levels that a dedicated buy indicator says will be profitable.
The tool called Smart DCA from on-chain analytics platform CryptoQuant indicates when the BTC/USD pair is trading below its short-term strike price.
The strike price refers to the aggregate price at which supply last moved. Smart DCA uses trades that occurred between a week and a month prior to the observation date to identify relatively lower prices and, therefore, profitable buying opportunities.
DCA refers to USD cost averaging — the practice of buying BTC with a set amount of capital at regular intervals.
At $95k, BTC/USD is now in “a favorable zone for DCA strategy execution,” CryptoQuant contributor Darkfost wrote in one of this weekend’s Quicktake blog posts.
“Using a DCA strategy helps reduce the impact of volatility and reduces the associated risk, making it a prudent approach depending on market conditions,” he explains.
“This tool, when used in conjunction with an understanding of broader market trends and sentiment, can provide valuable insights for making informed investment decisions.”
Bitcoin Smart DCA chart (screenshot). Source: CryptoQuant
Previously, TinTucBitcoin reported on another indicator that conversely advises sustainable holders to sell BTC when the supply profit reaches a certain level.
“Severe FUD” affects psychology
Bitcoin sentiment may have suffered more than price during last week's liquidity crunch — but research suggests that could ultimately benefit bulls.
In a post on the X platform on December 22, research firm Santiment revealed what it described as “the highest FUD spiral of the year” among social media users.
Analyzing comments on X, Reddit, Telegram and 4Chan, Santiment calculated that for every four positive comments in the market, there are five negative comments.
“The further crypto purge has pushed Bitcoin’s crowd sentiment down to its most negative statistical point of the year,” it wrote in accompanying commentary.
“Vocal traders are now expressing serious FUD, and that is good news for contrarians knowing that markets move in the opposite direction to retail expectations.”
Bitcoin social media sentiment data. Source: Santiment/X
A chart highlights similar scenarios in 2024, all of which coincide with market recoveries.
Meanwhile, the Crypto Fear & Greed Index, which tracks sentiment among traders from various data sources, remains at “greed.”
The index peaked at 94/100 on November 22, marking a historically known level for a bearish market reversal. On that day, the BTC/USD pair closed at around $99k.
The last time “greed” was so prevalent among traders was in February 2021.
Crypto Fear & Greed Index (screenshot). Source: Alternative.me
