Bitcoin (BTC) continues to grapple with sustaining its position above crucial support levels following a weakened weekly close. As the holiday period approaches, BTC struggles are within the mid-$90,000 zone, with a bearish momentum dominating the current price action.
The largest crypto by market cap has witnessed what many would call a woeful week after hitting an all-time high on December 17. However, analysts are hoping the festive week will change the coin’s outlook for the end of 2024, even though bears seem to hold crucial positions in the current market trading phase.
Bitcoin intraday trading charts: Ascending consolidation and recent pullback
In recent weeks, Bitcoin exhibited an ascending consolidation pattern around the $108,000 resistance region. This phase was disrupted by heightened selling pressure and distribution activity from large market participants, leading to a sharp 15% decline.
The price found support at approximately $90,000, coinciding with the middle boundary of a long-standing bullish price channel. This zone represents a critical line of defense against deeper corrections.
Bitcoin price chart | TradingView
Technical analysis highlights that a rebound from the current support levels could pave the way for a renewed attempt to reclaim the $108,000 mark. Conversely, failure to maintain support may result in a more significant correction, with the channel’s lower boundary near $75,000 emerging as the next key support level.
As seen on BTC’s daily chart, temporary support has emerged near the lower trendline at $94,164, aligning with key moving averages. Indicators suggest a potential short-term bounce; however, the overall sentiment remains more bearish than not.
Bearish indicators weigh on price action
Recent data from TradingView reflects Bitcoin’s ongoing struggle, with BTC/USD still down $13,000 from last week’s all-time highs. According to trader and analyst Rekt Capital, BTC has made a Bearish Engulfing candlestick formation on the weekly chart. This development, coupled with the loss of critical weekly support levels, signals the end of a five-week uptrend.
Rekt Capital further warned of Bitcoin’s potential transition into a multi-week correction phase. Any relief rally may face resistance at previously lost support levels, reinforcing the likelihood of additional downside continuation.
Indicators such as the RSI (14), currently at 42, show mild recovery but remain in bearish territory. Similarly, the Stochastic RSI’s bullish cross in the oversold region suggests short-term upward momentum, though the MACD’s bearish crossover persists, indicating weakening momentum.
Bitcoin price movements: Source – TradingView
Holiday trading periods often introduce heightened volatility due to reduced liquidity in the market. As liquidity profiles thin during these out-of-hours trading sessions, price movements can become exaggerated.
Market commentator Mark Cullen identified two critical liquidity zones into 2025: $115,000 and sub-$80,000. He questioned which level would be tested first and suggested the potential for significant price swings to target both.
A drop to $80,000 would align with historical bull market corrections. Glassnode’s data indicates that prior Bitcoin cycles experienced dips of 20% or more on the path to new all-time highs.
Interestingly, the severity of #Bitcoin drawdowns during bull market uptrends has declined as the market grows. The deepest drawdown this cycle was -32% (Aug 5, 2024), with most corrections only -25% below local highs, reflecting spot ETF demand & rising institutional interest. pic.twitter.com/wpanco629S
Despite the current cycle’s relative stability, the deepest drawdown of -32% in August 2024 echoes the crypto’s inherent volatility. Spot ETF demand and rising institutional interest have also tempered with price fluctuations, as the market seems to be sensitive to macroeconomic shifts.
On-chain metrics: Network activity is less than previous highs
Bitcoin’s active addresses, a key on-chain metric, reveal a divergence between price action and network activity. While the 100-day moving average of active addresses has rebounded, it has yet to reach its all-time high. This discrepancy suggests that a prolonged correction could occur if network activity declines further.
Bitcoin Active Addresses – Source: TradingView
Additionally, the Federal Reserve’s recent interest rate cut of 0.25% dampened risk-asset sentiment. Bitcoin, along with other cryptocurrencies, experienced renewed pressure as the prospect of additional rate cuts diminished.
According to analysis from The Kobeissi Letter, BTC’s price is exhibiting a notable correlation with the global money supply (Global M2). Historically, Bitcoin prices have followed Global M2 with a lag of approximately 10 weeks.
Over the past two months, Global M2 has dropped by $4.1 trillion, from a record $108.5 trillion in October to $104.4 trillion in December, the lowest level since August.
This decline signals potential downward pressure on Bitcoin prices if the trend persists. The Kobeissi Letter highlighted the significance of this relationship, saying:
“As global money supply hit a new record of $108.5 trillion in October, Bitcoin prices reached an all-time high of $108,000. Over the last two months, however, money supply has dropped by $4.1 trillion. If the relationship still holds, this suggests that Bitcoin prices could fall as much as $20,000 over the next few weeks.”
Despite macroeconomic headwinds, BTC’s growing illiquid supply offers a counterbalance. André Dragosch of Bitwise highlighted this trend, noting that a higher illiquid supply indicates increased scarcity, which could support Bitcoin’s price.
While macro factors continue to exert downward pressure, on-chain tailwinds from Bitcoin’s supply deficit may mitigate the impact.
Bitcoin vs Illiquidity Supply | BitMart
Dragosch expects BTC to remain volatile in early 2025 but believes the scarcity dynamics driven by its illiquid supply could provide attractive buying opportunities for long-term investors.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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