On December 28, 2024, Bitcoin's price was approximately $94,400, showing a significant correction from previous highs. As a highly volatile digital asset, Bitcoin's price fluctuations have always attracted investor attention. However, from multiple aspects of market data and the macroeconomic background, Bitcoin currently faces the risk of further decline.
This article will explore why Bitcoin may be in a bearish trend from multiple perspectives, including technical analysis, market sentiment, macroeconomic environment, and on-chain data.
1. Technical Analysis: Challenges to Important Support Levels
Bitcoin has recently attempted multiple times to break through the psychological barrier of $100,000 but failed, quickly falling back to $94,400. However, despite the price not breaking through previous highs, Bitcoin is currently still above the 200-day moving average (200-MA). The 200-day moving average is widely regarded as the dividing line between bull and bear markets, and the current price position indicates that the market has not yet entered a full bear market.
Nevertheless, the 'double top pattern' on the daily chart remains alarming. Double tops are generally seen as a bearish signal, indicating that the market has made two attempts to break through key resistance levels and may lead to further price declines. Additionally, the continuous shrinkage of trading volume indicates a lack of market momentum, and future sell-off pressure may increase.
2. Market Sentiment: Retreat of Speculative Frenzy
According to the latest Cryptocurrency Fear and Greed Index, market sentiment is currently in the 'fear' zone. This indicates that investor confidence is weakening, and more people tend to avoid risks.
In the bull markets of 2021 and 2023, a large influx of funds drove Bitcoin prices to new highs. However, the market situation in 2024 is completely different. Many retail investors have begun to withdraw from the market, while institutional investors' purchasing power is also weakening. This trend reflects Bitcoin's gradual redefinition from a 'speculative asset' to a 'risk asset'.
Additionally, compared to the previous bull market, current Bitcoin network activity has significantly declined. On-chain data indicates a decrease in the number of active addresses and a slowdown in the creation of new addresses, showing a reduction in overall market participation.
3. Macroeconomic Background: Interest Rate Hikes and Liquidity Crisis
The changes in the global macroeconomic environment have also put pressure on the Bitcoin market. In 2024, the Federal Reserve continues to implement tightening monetary policy, maintaining the benchmark interest rate at historically high levels. This high-interest-rate environment attracts a large flow of funds into traditional financial markets, such as bonds and savings accounts, rather than high-risk assets like Bitcoin.
Furthermore, as inflation rates gradually decline, Bitcoin's appeal as an inflation-hedging tool has weakened. In 2021 and 2022, many investors bought Bitcoin to combat high inflation. However, when inflation is no longer a major threat, this demand will naturally decrease.
The tense international situation has also brought uncertainty to the market. While some investors have viewed Bitcoin as 'digital gold', a safe-haven asset, actual performance has shown that Bitcoin's price is more correlated with the stock market, further weakening its hedging function.
4. On-chain Data: Divergence between Whales and Retail Investors
The analysis of on-chain data further supports the bearish view on Bitcoin. The holdings of whale addresses (i.e., addresses holding large amounts of Bitcoin) have continued to decrease since November, while the holdings of retail investors have been increasing. This behavior of 'whales selling and retail buying' is often seen as a signal of a market top, as large funds tend to have a sharper market sense.
At the same time, the Unspent Profit and Loss (NUPL) indicator for Bitcoin shows that the market is overall in a 'fear' phase. This indicates that the book value of most investors' assets is below the purchase cost, further exacerbating the selling pressure in the market.
The net inflow of Bitcoin to exchanges has also increased, indicating that more investors are transferring Bitcoin to exchanges, possibly preparing for potential sell-offs.
5. Regulatory Pressure: Increase in Uncertainty
In 2024, cryptocurrency regulatory policies worldwide have become stricter. The U.S. Securities and Exchange Commission (SEC) is still investigating several major exchanges, while the EU has also introduced stricter regulations on digital assets. These policies have brought uncertainty to the market, further undermining investor confidence.
Moreover, Bitcoin mining activities have also been restricted. Many countries have raised the energy costs of mining and imposed higher taxes on high-energy-consuming cryptocurrency activities. This not only increases Bitcoin's production costs but may also affect market supply.
6. Market Cycles: Historical Similarities
The historical price of Bitcoin shows that its operational trajectory usually follows a four-year cycle. This cycle is closely related to Bitcoin's halving events. However, the current price trend bears many similarities to the early stages of the 2018 bear market. At that time, Bitcoin experienced a rapid drop below key support levels after several years of significant upward movement and entered a prolonged downward phase.
If history repeats itself, Bitcoin's price may further decline in the coming months and hit lower bottoms. This situation will put immense pressure on market participants, especially retail investors who have recently entered the market.
7. Investment Strategies: How to Deal with Downward Market Risks?
In the current market environment, investors need to adopt more cautious strategies:
Diversify investments: Avoid concentrating all funds in Bitcoin or the cryptocurrency market.
Set stop-loss orders: Automatically close positions when prices reach a certain lower limit to reduce potential losses.
Focus on long-term value: Despite short-term downward risks in the market, Bitcoin's long-term prospects may still be worth looking forward to. Investors can choose to gradually build positions rather than investing a lump sum.
Learn and observe: Closely monitor market dynamics and on-chain data to adjust investment strategies in a timely manner.
Conclusion
Bitcoin's current market performance shows distinct bearish signals. From technical analysis to macroeconomic background, along with on-chain data and regulatory policies, multiple factors may lead to further declines in Bitcoin's price in the near future. However, as an innovative digital asset, Bitcoin's long-term value remains a significant focus.
Investors should rationally deal with the current market fluctuations, make cautious decisions, and maintain long-term confidence in the market. Regardless, the next developments in the Bitcoin market will undoubtedly become the focus of global investors.
