Bitcoin (BTC) begins Christmas week at a critical juncture, with analysts warning of potential sharp declines as support levels falter. BTC/USD has dipped further below the $100,000 psychological level, sparking bearish sentiment in the market.
Here are five key factors influencing Bitcoin’s price this week:
1. Bearish Engulfing Weekly Pattern
Bitcoin closed the previous week with a "bearish engulfing" candlestick pattern, signaling potential downside ahead. Analyst Rekt Capital highlighted that BTC/USD has lost its weekly support, breaking a five-week uptrend.
“Bitcoin is transitioning into a multi-week correction,” Rekt Capital cautioned, suggesting old support levels could turn into new resistance zones. Some traders predict a dip to previous all-time highs around $74,000, which aligns with historical pullbacks during bull markets.
2. Holiday Liquidity Challenges
With reduced market activity during the holidays, Bitcoin faces heightened volatility risks. Analyst Mark Cullen noted significant liquidity at $115,000 on the upside and sub-$80,000 on the downside. “Which level gets hit first?” Cullen speculated, warning of potential festive swings.
3. Macro and Fed Impact
Last week’s hawkish tone from the Federal Reserve, despite a 25 basis-point rate cut, has left risk assets, including Bitcoin, on edge. The Fed’s reduced rate-cut outlook for 2025 and a $4.1 trillion decline in global money supply since October pose further liquidity challenges.
“If the relationship holds, Bitcoin could see a $20,000 drop over the next few weeks,” warned The Kobeissi Letter, citing historical correlations between global money supply and BTC price action.
4. Opportunities for Long-Term Investors
Despite the bearish sentiment, CryptoQuant’s Smart DCA tool suggests Bitcoin is trading in a favorable range for dollar-cost averaging (DCA). At $95,000, BTC/USD is below its short-term realized price, signaling potential buying opportunities for long-term holders.
“This is a prudent approach to mitigate volatility risks,” CryptoQuant contributor Darkfost noted, highlighting the potential for strategic accumulation at current levels.
5. Sentiment at Year’s Lowest Point
Bitcoin sentiment has plummeted amid market turbulence, with Santiment reporting the “highest FUD spiral of the year” on social media. For every four positive comments, there were five negative ones, indicating widespread fear.
Interestingly, historical data shows such extreme negativity often precedes bullish rebounds. “Markets tend to move opposite to retail expectations,” Santiment remarked.
Meanwhile, the Crypto Fear & Greed Index remains in "greed" territory, reflecting traders’ mixed emotions. The index last peaked at 94/100 in November, a level typically associated with market reversals.
Outlook for Bitcoin
As Bitcoin trades in the mid-$90,000 range, it faces mounting pressure from technical, macroeconomic, and sentiment-driven factors. While long-term investors may find this an opportune moment for accumulation, short-term volatility could test key support levels, potentially pushing BTC to $80,000 or lower before finding stability.
All eyes remain on market liquidity and macroeconomic developments as the year-end approaches, according to Cointelegraph.
