As Bitcoin (BTC) starts another week in a precarious position, with whales selling off, the mood has shifted.
The weekly close has done little to allay traders’ fears, as the “up only” BTC price activity has stagnated.
With just two weeks until the end of the year, pressure is mounting across risk assets, with more macro data releases — which can cause short-term volatility — still to come, such as the US GDP figures following the Federal Reserve’s recent moves.
As high fees leave investors frustrated, some commentators are now looking ahead to the potential approval of a spot exchange-traded fund (ETF) next month, rather than a “Santa rally” for Bitcoin.
However, the sentiment in the crypto space and beyond is still one of greed, and this may create an opportunity for further upside as disbelief plays out.
Cointelegraph takes a closer look at these factors as the end of the year approaches and the fate of BTC’s price performance for 2020 is decided.
Analysts line up key BTC price support levels
At around $41,300, the Dec. 17 weekly close for BTC/USD came midway through a local sell-off.
The downside continued overnight, with Bitcoin hitting $40,800 before reversing during the Asia trading session to return to just above $41,000, according to data from Cointelegraph Markets Pro and TradingView.
Traders and analysts — already wary of potential further dips based on recent BTC price action — remain cautious.
“The Charts Don’t Lie,” trading resource Material Indicators summarized at the start of one post on X (formerly Twitter).
Material Indicators noted that Bitcoin had lost its 21-day moving average into the new week — a development it says is “inherently bearish.” It added that it was expecting year-end profit taking and tax loss harvesting to prevail in the near term.
Co-founder Keith Alan also flagged an ongoing battle for a key Fibonacci retracement level, which corresponds to the November 2021 all-time high.
Popular trader Skew added some lines in the sand in the form of the 200-period and 300-period exponential moving average (EMA) on 4-hour timeframes, along with the 50-day EMA — all currently around $2,500 below spot price.
“From here there’s two technical levels on 1W/1M,” he continued in commentary on weekly and monthly timeframes, providing traders with key support levels for profiting from web 3.0.
PCE, GDP due amid increasing belief in Fed “pivot”
The Personal Consumption Expenditures (PCE) Index — the Fed’s favored inflation measure — will be revealed in the upcoming week, leading U.S. macro events.
After last week’s multiple Fed decisions, data must now demonstrate inflation abating towards 2024.
The Federal Open Market Committee (FOMC) meeting to decide changes to interest rates is not until the end of January, but since last week, markets have been entertaining the possibility of a pivot becoming reality.
The latest data from CME Group’s FedWatch Tool currently puts the odds of a rate cut next meeting at around 10%, with several key macro figures still to be released.
“Even with stocks up, uncertainty is still everywhere,” trading resource The Kobeissi Letter concluded in an X post outlining the coming week’s prints.
In addition to PCE, jobless claims and revised Q3 GDP will both be available on Dec. 21.
As Cointelegraph reported, U.S. dollar strength hit multimonth lows around the FOMC, providing a potential boost for crypto markets. Those lows have since faded as the U.S. Dollar Index makes a modest comeback, still down around 1.9% in December.
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Fees stay elevated
The recent surge in Bitcoin transaction fees has sparked a heated debate, with these reaching their highest levels since April 2021. As a result of the increasing demand for block space, miners have seen their revenues skyrocket, surpassing the $69,000 all-time high of Bitcoin. However, fees have already dropped significantly in the new week, with next-block transactions confirming for under $15.
Fred Krueger believes that market participants should focus their attention on the decision to approve the first U.S. spot Bitcoin ETFs due early next month. He also defended Ordinals’ creators’ right to use the blockchain to store their work, noting that the fees debate is a “nothingburger” for now.
Vijay Boyapati, a researcher and software developer, has also highlighted the fleeting nature of the fees debate throughout Bitcoin’s history. He suggested that off-chain solutions, such as the Lightning Network, should be the default for exchanges and wallets, as this would help to reduce the high L1 fees.
Data from Mempool.space shows that the backlog of unconfirmed transactions still stands at around 300,000, which further emphasizes the need for how to profit from web 3.0 and the development of layer-2 solutions.
New addresses pose bull market momentum risk
The Bitcoin network’s growth rate has slowed during this month’s bull market recovery.
Glassnode, an on-chain analytics company, has confirmed that the number of new BTC addresses appearing in an on-chain transaction for the first time has been decreasing since December 17th, which was about half of the local daily high observed in early November.
Ali, a popular social media analyst, commented on the numbers and noted that the drop in Bitcoin network growth could be an obstacle to the price of BTC reaching $44,000.
“The decline in Bitcoin network growth over the past month casts doubt on the sustainability of $BTC’s recent move to $44,000,” Ali said.
Disbelief behind the fear
The recent cooling of Bitcoin’s “up only” trend has caused a decrease in market greed.
Data from the Crypto Fear & Greed Index reveals that many crypto market members have had to take a step back and rethink their strategies in the last week.
At present, the Fear & Greed Index is at 65/100, which is still “greedy”, but is at its lowest level in almost a month.
Historically, scores higher than 90/100 have been linked to long-term market peaks, as investors become too optimistic. An exception to this was the 2021 all-time high of $69,000, when Fear & Greed was at 75/100 before it began to decline.
Caleb Franzen, senior analyst at Cubic Analytics, commented on the traditional market Index, saying that sentiment is still recovering from the extended Fed tightening cycle which started in late 2021.
“The Fear & Greed Index is comfortably in the ‘Greed’ range. However, it was just in ‘Fear’ 4 weeks ago and was in ‘Neutral’ to ‘Extreme Fear’ for 2.5 months in September through November,” he said to X subscribers on Dec. 14.
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