Analysts are looking for a bottom in Bitcoin (BTC), but it may not be a plunge to $40,000 or lower.
The global risk appetite remains sluggish, and Bitcoin bulls are now facing a bearish week after a relatively quiet weekend.
There aren’t many triggers that will help BTC/USD rise in the New Year despite the absence of a Santa rally for anyone. However, the on-chain metrics are still strong and miners refuse to spend.
Cointelegraph looks at Christmas and what to watch for when it comes time to assess where Bitcoin might be heading.
Bitcoin bulls seem far off at $50,000
Bitcoin did not make any notable moves this weekend, but attention now turns to a possible volatile “bottoming” of the market.
BTC/USD is still at $46,000 and bulls are not able to find the momentum to attack the $50,000 mark.
Although buying is happening, especially among small retail investors, it’s not common for more experienced market participants.
Popular trader Pentoshi believes these could still avoid a retest of 40,000. Pentoshi, a popular trader, said that these could still avoid a retest of $40,000.
Finex is the best broker for $BTC. This is similar to the situation in which they absorb selling at these key levels. Referring to market events at the end September, he wrote: “See Sep post 40.7k bottom.”
“Now looking for 42-46k top imo.”
BTC/USD 1-hour candle charts (Bitstamp). Source: TradingView
Other traders were more optimistic with Galaxy, a fellow trader calling for an “green week” dominated by altcoins.
A surprise end to 2021 is possible with only ten days remaining in the year. This also applies to crypto markets.
Decentrader, a trading platform, highlighted Bitcoin’s Advanced NVT indicator in its most recent market update as a potential springboard to higher prices.
The historical cycle metric is still bottoming but traders could be surprised by its low “overbought” level.
“Will this be the same? Will we see a rebound and rally into Christmas break?” Is there more year-end profit taking?” the update summarized.
“Right now, $BTC is at the key decision point level. It would be wise to manage one’s risk carefully until there is a clear trend.”
Chart showing Bitcoin Advanced NVT (light blue). Source: LookIntoBitcoin.com
The miners continue to hodl
Miners are one group of Bitcoin hodlers who have been reluctant to sell at current prices. Their outflows have fallen to their lowest level in three months.
Glassnode data shows that miner outflows almost doubled in less than a month. This reflects the market’s turnaround since the highs.
September saw a similar dramatic fall, with spot market prices hitting their lowest point two weeks later. Historical precedent is therefore set by this month’s actions.
Bitcoin miner withdraws 1 hour chart (7-day moving mean) Source: Glassnode/ Twitter
Additional data indicates that the unspent supply is poised to reach all-time highs. This marks the culmination of a trend started by miners in 2020.
This means that miners don’t have to rush to spend their block subsidies after a block has been successfully mined.
The #Bitcoin miner unspent supply currently sits just 500 $BTC lower than ATH. These coins are given to miners in a reward for solving blocks, but they have never been spent onchain. Since March 2020, miners have been HODLing more $BTC. Live Chart: https://t.co/D2jZTD0O52 pic.twitter.com/vJy1G41Xvf
— glassnode (@glassnode), December 20, 2021
Macro trades 21-month bull Run for Volat
Sources warn that macrovolatility will continue into 2022, a trend that is troubling investors.
Unexpected bearishness, just like Bitcoin, could mean that Q4 will end in a whimper this year and deny the market their classic Santa rally.
Both the Coronavirus as well as the political turmoil in the United States are to blame. The former resulted from one senator refusing to approve President Joe Biden’s $2 trillion spending plan.
Stocks in Asia fell on Monday, ahead of the U.S. Open, and the mood was cautious.
Robert Schein, Blanke Schein Wealth Management’s chief investment officer, said that investors should expect Covid to remain a major factor in market performance going into 2022.
“Investors aren’t used to long periods of volatility after the bull run that we’ve seen over 21 months,” said a spokesperson.
Schein was referring to the global market recovery since March 2020, when Bitcoin fell to $3,600.
All this is happening while the U.S. Dollar is strengthening — a potential new headwind for Bitcoin, which is historically inversely related with the greenback.
The U.S. currency index (DXY), which measures the strength of dollars against a basket major trading partner currencies, was at 96.6 at time of writing. It had almost reached 97 last week.
U.S. dollar currency indicator (DXY), 1-day candle chart. Source: TradingView
GBTC reaches biggest ever discount
Bitcoin below $50,000 could be a bargain for large-volume investors. But one industry yardstick says otherwise.
According to data from Coinglass, the Grayscale Bitcoin Trust (GBTC), which is the largest institutional BTC vehicle, trades at a discount of more than 20%.
GBTC price vs. Holdings vs. GBTC Premium chart. Source: Coinglass
GBTC plans to convert next year to a Bitcoin spot-price exchange-traded funds (ETF). Market behavior has changed significantly in the second half 2021.
Cointelegraph reported that the investment fund, which spent the first part of its existence trading at a premium, now offers institutional buyers what is actually a “bargain basement” BTC.
As of Dec. 18, the discount was 22.95% — a strange phenomenon that points to what some believe is an even greater lack of demand for GBTC share.
You can buy GBTC shares, backed with physical BTC at a 17% discount, and no one is interested asking for a friend.
— TonaldDusk (@tonald_dusk) December 13, 2021
The U.S. continues to be concerned about regulatory uncertainty surrounding spot-based ETFs. This year, only futures-based products were approved. However, the industry is continuing to rally around this issue and arguing for changes in 2022.
Coinbase, a major U.S. exchange, supported plans to convert GBTC last week.
“GBTC shares may trade at premiums and discounts to its net asset value (i.e. the Bitcoin it holds). These premiums and discounts are often dramatic. GBTC shares have been traded over-the counter at a premium of up to 142% and a discount of up to 21% to its net asset value,” a letter addressed to the Securities and Exchange Commission states.
“If Arca’s proposal gets approved, GBTC can use the ETP mechanics 4 that minimize the variations between its share prices and the net asset value (‘NAV) of its Bitcoin holdings. As a result, U.S. retail investor will be able access the Bitcoin market via the familiar ETP structure, with trading prices that are more closely aligned to spot Bitcoin trading prices.
Spot-based businesses have already been able to operate with great success across Canada’s border, as well in Europe and other parts of the world.
Overnight, cold feet freeze
Spot price action may not have been as active over the weekend, but it is no consolation to nervous traders.
Related: Happy Bearday, Bitcoin: It has been three years since Bitcoin bottomed out at $3.1K
The Crypto Fear & Greed Index shows that sentiment about crypto is weaker than ever.
The Index continues its trend of crisscrossing, and is now back in the “extreme Fear” zone as of Monday. It failed to crack 30/100 during December.
Comparatively, Fear & Greed scored 84/100 at Nov. 9’s all-time highs $69,000 — “extreme greed.”
Popular analyst and trader Rekt Capital frequently reiterates that extreme fear “precedes financial opportunities.”
He said that the current BTC channel is similar to the channel BTC formed in May. This was in reference to the events following the China mining ban, when BTC/USD reversed 50%. Fear & Greed also bottomed multiple time at 10/100.
It took only one month for the Index’s bottoming structure to consolidate and return to the “extremely greedy” zone.
Crypto Fear & Greed Index. Source: Alternative.me