After several consecutive days of significant gains, Bitcoin, which once approached $100,000, finally showed a clear pullback.
As of today (27th) at the time of writing, Bitcoin has fallen from around $98,000 to below $93,000, hitting a low of $90,791, with a daily decline of 1.66%.
The reasons for Bitcoin's decline may be related to leveraged liquidations, profit-taking by long-term holders, and capital rotation. Increased confidence in the U.S. Treasury market and a large number of options expiring at the end of the month are key factors driving Bitcoin's pullback.
Although Bitcoin is temporarily holding around $93,000, will it decline again in the short term?
Could Bitcoin further drop below $90,000?
The valuation of call options is lower than that of put options.
On the well-known cryptocurrency derivatives exchange Deribit, the trading valuation of call options has for the first time in at least a month turned negative, indicating that investors are buying put options.
This may indicate that professional traders are preparing for further declines in Bitcoin, which is why they are pre-purchasing puts for hedging. On Monday, traders sold call spreads on the off-exchange liquidity network Paradigm and bought puts related to Bitcoin.
Currently, the Deribit options market predicts that the probability of Bitcoin exceeding $100,000 by the end of the year is only 37.6%.
Changes in Coinbase's premium
U.S. investors' demand for Bitcoin is weakening.
Coinbase's premium indicator shows that Bitcoin's price on Coinbase has fallen into a negative premium relative to Binance, indicating a decline in buying interest in the U.S. market, which may signal a change in market sentiment.
Divergence in the Relative Strength Index (RSI)
Although Bitcoin rose above $99,000 last week, the Relative Strength Index (RSI) did not rise in tandem, showing a divergence.
From a technical analysis perspective, this may indicate that the current bullish momentum for Bitcoin has weakened.
Where is the support level for Bitcoin?
Although there was an 8.2% pullback this week, it cannot be fully viewed as a trend reversal. Bitcoin's potential bottom may be around $85,000, which is considered a normal adjustment. If market sentiment turns bullish again, Bitcoin still has a chance to return to its historical high of $99,419.
It is worth noting that even if Bitcoin starts to pull back in the short term, institutional investors' interest has not waned.
For example, MicroStrategy recently announced it completed a $5.4 billion plan to buy Bitcoin, and companies like Japan's MetaPlanet and America's Semler Scientific are continuously buying Bitcoin, showing institutional investors' long-term positive outlook on cryptocurrencies.
Still optimistic that the price will reach $125,000 by the end of 2024.
Does data determine the future direction?
The market remains cautious about a rate cut in December. Traders slightly prefer another 0.25 percentage point cut, which Minneapolis Federal Reserve President Neel Kashkari considers 'reasonable.' Chicago Federal Reserve President Austan Goolsbee also supports the possibility of further rate cuts.
Currently, Bitcoin is fluctuating around $93,000, with Ethereum at about $3,450. Traders are adjusting their positions, and volatility in the derivatives market is changing. The buying sentiment for Ethereum options has shifted from buying to selling, reflecting market concerns about potential downside risks.
The government bond market reacted subtly to this. The yield on the two-year Treasury, sensitive to policy changes, fell by 0.02 percentage points to 4.25%, the lowest level in a week. The S&P 500 index slightly pulled back after the meeting minutes were released but ultimately closed up 0.6%, reaching a historic high.
The future direction of monetary policy will highly depend on the performance of inflation and employment data. The Federal Reserve will maintain high flexibility, closely monitor economic indicators, and adjust policy positions promptly when necessary. For both the cryptocurrency market and traditional financial markets, upcoming economic data will become a focal point and may significantly impact asset price trends.
Although Bitcoin is currently facing pullback pressure, it is merely a normal market adjustment and does not indicate that the bull market has ended.
In previous cycles, capital entering the cryptocurrency space faced various obstacles, such as difficulties in deposits and withdrawals, uncertain regulations, pending legal cases, and excessive caution from trading platforms and cryptocurrency companies. Now, this situation has completely changed. The launch of spot ETFs and regulatory clarity have not only opened the floodgates for capital entering the cryptocurrency space but also provided opportunities for funds looking to invest in cryptocurrency startups.
Everything is in place... No one could foresee that so many positive factors would coincide at such a perfect moment. This bull market has the most explosive potential in history, including altcoins and Ethereum. Be patient! Once the bull market starts, the scale of capital inflow will be immeasurable.
