Bitcoin Price Struggling: Is Another Crash Coming?

During the last week, the price of Bitcoin underwent a violent downward correction, losing about 15% from the all-time highs at 108,000 dollars.

After the last few months of “up only,” the cryptocurrency encounters its first major red obstacle on the chart, enough to change the outlook in the short term.

The analysts wonder if Bitcoin will now manage to start rising again or if it will face a new crash below 90,000 dollars.

All the details below.

Bitcoin faces a 15% price drop: is it the end of the bull market?

After an 80% growth in the last 3 months, Bitcoin experiences a significant price drop, losing the psychological threshold of 100,000 dollars.

The cryptocurrency had reached a new all-time high on Tuesday, December 17, but was then pushed back by the downward pressure from the bears.

In just one week Bitcoin lost 15% of its value, testing the support at 92,000 dollars, and then bouncing back to the current level of 95,000 dollars.

The main cause of this decline seems to be the recent announcement by Jerome Powell, who in the latest FOMC spoke about the shift to a more restrictive monetary approach.

The head of the Federal Reserve explicitly stated that there is a possibility that in 2025 there will be only 2 federal rate cuts, compared to the previous plan of 4 cuts.

This has negatively impacted all financial markets, creating a climate of uncertainty about the future direction of the price of Bitcoin.

The impact on the markets was so violent that on some exchanges, such as Coinbase, large price discrepancies were recorded compared to other exchanges.

Now if Bitcoin fails to stabilize above the current levels, it risks losing even the last local low of 92,000 dollars.

This would contribute to slowing down the expansion phase of the bull market, jeopardizing the potential upcoming bullish months. 

In any case, some analysts believe that this bear market may represent a necessary and healthy correction for the market.

Investors might now regain confidence and enter the market at more advantageous prices, fueling the possibility of another more lasting bull.

Analysis of liquidations and data on derivatives

The recent crash in the price of Bitcoin was accompanied by strong speculative activity by traders in the derivatives markets.

Between December 18 and 20, approximately 400 million dollars of long positions were liquidated, sweeping away the traders exposed to the bull market.

However, the drop was not as impactful as the one observed on December 5, when almost half a billion dollars were liquidated in a single day.

Source: https://www.coinglass.com/currencies/BTC

Very interesting to observe how the funding rate has not experienced particular jolts, remaining between 0.01% and 0.007%.

This means that in recent days there has not been such a high demand for leverage, and that the collapse of the price of Bitcoin was not triggered by an excess of the bull market.

Rather, it appears evident that a large number of investors have preferred to take profit and exit the cryptocurrency, in a moment of uncertainty for the financial markets.

This is demonstrated by the sharp decline in the open interest, which in just one week saw 4 billion dollars in positions on Bitcoin lost.

This is the first major drop in interest in derivatives since Trump’s elections, and more generally the first major decline in Q4 2024.

In any case, there remain 30 billion dollars of open positions, about double compared to what was recorded at the bull of March, and about triple compared to a year ago.

This suggests that investors are still convinced that the price of Bitcoin can bring more moments of joy, continuing its phase of bull market.

Source: https://coinalyze.net/bitcoin/open-interest/

What to expect now from the price of Bitcoin: recovery or new leg down

Bitcoin is now in a clear phase of stalemate, with the price of the cryptocurrency struggling to find a situation of equilibrium.

At the moment, the quotations are slightly above the EMA 50 on the daily time frame, from which a new bull stimulus could start in the coming days.

In general, from here up to 90,000 dollars, the bull could make themselves heard and absorb a new wave of potential downward pressure from the bear.

On the other hand, it is not excluded that in the coming weeks another phase of correction may occur, which could further lower the price of Bitcoin.

To fuel this hypothesis, there is a divergence on the RSI indicator, which suggests an exhaustion of the bullish strength that has characterized the past few weeks.

In such a complex and volatile scenario, it is necessary to identify the most important price levels to keep an eye on.

From a bull perspective, we can agree that a recovery to 100,000 dollars could in itself be enough to bring euphoria back to the market. However, the break of 103,000 dollars would be even more convincing and could trigger a new flow of capital.

From a bear perspective, we see the area between 90,000 and 92,000 dollars as a zone of strong interest, which, as previously mentioned, could be the last stronghold before a more violent correction.

Once this support is broken, the price of Bitcoin could aim directly for 80,000 dollars, without any particular counter-responses from the demand.

Below this level, new scenarios would open up, which could risk putting an end to the much-loved bull market.

In any case, so far the situation is still under control, with the macro trend remaining bullish, leaving hope for a new leg up by the end of the year.