Bitcoin Drops To Monthly Low As Year-End Approaches, More Impulsive Decline?
Bitcoin moved closer to the $17,000 level on Tuesday. The digital currency dropped to $16,400, its lowest level in the last three weeks. As year-end approaches, BTC could face high volatility and low liquidity.
Bitcoin Hit A Brief Surge
Bitcoin surged to a short-lived peak of $16,837 in today’s session, barely 24 hours after hitting $16,398. The cryptocurrency saw an impulsive decline after experiencing significant rejection at the resistance level.
The sharp fall has been associated with a straight daily decline for the S&P 500 and general nervousness about the Federal Reserve’s potential to hike interest rates.
BTC/USD trades at $16,870 on the daily chart. Source: TradingView
BTC could witness more decline as the year closes given the decline in trading volume and liquidity. This would lead to a spike in the volatility of the asset.
Katie Stockton, the founder of Fairlead Strategies LLC, has predicted that BTC could retest November lows, dropping “near $15,600, in the coming weeks.”
BTC hit an all-time high of $68,997 on Nov. 8, 2021. But the big crypto produced a major shift in market structure by producing a lower low on the weekly timeframe at $32,995 on January 24. This move confirmed the start of a bear market.
Possible Rally For BTC
While the dust settles from the FTX crash and FUD surrounding Binance, the bitcoin price could begin to see a gradual recovery over the next few months. According to Jim Wyckoff, “Neither the bulls nor the bears have any near-term technical advantage.”
This suggests that traders will continue to see “more choppy and sideways trading on the daily chart into the end of the year – barring any major fundamental shock to the marketplace,” Wyckoff concluded.
However, a tweet by Crypto Trader, PlanB shows that the next Bitcoin halving is set to take place in 15 months. The build-up in price will not happen for at least 5 months as the U.S. FED will continue to tighten up monetary policy. BTC price will have room to breathe as macroeconomic conditions soften.
Schroders, a global asset management firm, made the case that risky assets like Bitcoin have a nearly 80% chance of closing the year with positive returns.
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The investment firm noted that December was the best-performing month after collecting data on U.S. large-cap stocks since 1926. Schroders estimates that there is a 77.9% likelihood that large-cap stocks will end December with a net gain. The company divides all percentage gains vs. all percentage losses over the course of a month to arrive at these metrics.
Investors should keep in mind that this year, the correlation between Bitcoin and the stock market has been over 90%. It may be argued that until the end of the year, the peer-to-peer digital currency will continue to reflect price changes on the stock market.
Bitcoin is down 2% from December’s opening price of $17,167. Thus, following Schroders’ analysis, Bitcoin may rise by 3.5% to reach $17,550 by Jan. 1, 2023.
Featured image from Unsplash.com, charts from TradingView.com