After growing 80% in the past 3 months, the price of Bitcoin has significantly dropped, losing the psychological threshold of $100,000.
This cryptocurrency reached a new all-time high on Tuesday, December 17, but was then pushed back by selling pressure.
In just one week, Bitcoin lost 15% of its value, testing support at $92,000, before bouncing back to the current level of $95,000.
The main reason for this decline seems to be the recent announcement by Jerome Powell, who spoke about shifting to a more restrictive monetary approach in the latest FOMC meeting.
The head of the Federal Reserve has clearly stated that there may only be 2 federal interest rate cuts in 2025, compared to the previous plan of 4 cuts.
This has negatively impacted all financial markets, creating an atmosphere of uncertainty about the future direction of Bitcoin prices.
The impact on the market was so intense that on some exchanges, such as Coinbase, significant price discrepancies were recorded compared to other exchanges.
Now if Bitcoin does not stabilize at a higher level than current, it risks losing both the nearest local low of $92,000.
This will contribute to slowing down the expansion phase of the bullish market, jeopardizing the potential bullish months ahead.
In any case, some analysts believe that this bear market may represent a necessary and healthy correction for the market.
Investors can now regain confidence and enter the market at more favorable prices, boosting the possibility of another prolonged bullish rally.
Liquidation analysis and data on derivative products
The recent collapse of Bitcoin's price has been accompanied by strong speculation from traders in the derivatives market.
From December 18 to 20, approximately $400 million in long positions were liquidated, sweeping away traders exposed to the bullish market.
However, this decline has not had a significant impact like on December 5, when nearly half a billion dollars were liquidated in just one day.
It is interesting to observe that the funding rate has not seen significant fluctuations, remaining between 0.01% and 0.007%.
This means that in recent days, demand for leverage has not been too high, and the collapse of Bitcoin's price was not caused by an overheated bullish market.
Instead, it seems that many investors prefer to take profits and exit cryptocurrency during this period of financial market instability.
This is evidenced by the sharp decline in the number of open contracts, which lost $4 billion in positions on Bitcoin in just one week.
This is the first time interest in derivative products has sharply declined since Trump's election and generally the first significant drop in Q4 2024.
In any case, there is still $30 billion in open positions, double the amount recorded in March and three times that of a year ago.
This indicates that investors still believe that the price of Bitcoin can bring more enjoyable moments, continuing the market's bullish phase.
What to expect from Bitcoin prices today: recovery or new decline
Bitcoin is currently in a clear deadlock, as the price of this cryptocurrency struggles to find a balanced state.
Currently, the price is slightly above the EMA 50 line on the daily timeframe, from which a new bullish stimulus could start in the coming days.
Overall, from this price level up to $90,000, the buyers could speak up and absorb a wave of new selling pressure.
On the other hand, the possibility of another correction occurring in the coming weeks cannot be ruled out, causing Bitcoin prices to continue to decline.
To reinforce this hypothesis, there is divergence on the RSI indicator, showing that the bullish momentum characteristic of the past few weeks has waned.
In such a complex and volatile scenario, it is essential to identify the most critical price levels to watch.
From a bullish speculator's perspective, we can agree that a recovery to $100,000 alone might be enough to bring excitement back to the market. However, breaking $103,000 would be even more convincing and could trigger a new influx of capital.
From the sellers' perspective, we consider the range from $90,000 to $92,000 as a strongly interested area, as previously mentioned, possibly the last stronghold before a more significant correction.
Once this support threshold is broken, Bitcoin prices could head straight towards $80,000 without any specific reaction from demand.
Below this level, new scenarios will emerge, risking the end of the anticipated bullish market.
In any case, so far the situation remains under control, with the macro trend still optimistic, providing hope for a new advance by the end of the year.
