Why did bitcoin’s rise stop and when will it return?
Since bitcoin (BTC) rose to $103,000 (USD) last week, it has remained in a price range below that high.
So far this week, the price of the currency is in the range it has mostly held in the last two weeks. This ranges from USD 94,000 to USD 100,000.
In this way, the market shows a pause in the sustained upward trend that bitcoin had been having to new all-time highs since a month ago.
There are several reasons that explain why the rise that bitcoin was experiencing stopped. Firstly, profit-taking motivated by exceeding USD 100,000, a goal widely expected by the market.
This is the arrival of bitcoin for the first time at six-figure prices. It is natural that in the face of this milestone, various currency investors are driven to sell. to realize profits. Even despite bullish expectations, many carry out this strategy to ensure returns without getting rid of all their BTC holdings.
It should also be remembered that the currency had been on a sideways streak since March that it surpassed in November when it finally passed USD 73,000. Therefore, the rise since then (more than 36%) allowed an attractive margin to take profits and even more so for those who had held BTC before.
Bitcoin will register an appreciation of 120% in 2024 alone, even though at the time of writing it is trading at USD 98,000. With such performance, which exceeds four times that of traditional assets such as gold and the S&P 500 (SPX), it is to be expected that some will be led to realize profits.
At the same time, a slowdown in capital inflow into bitcoin has been exhibited which pushed its price back to levels seen in the last two weeks. This can be seen in the following graph.
Current prices may seem to some investors like bitcoin is expensive to buy relative to what it was trading at not long ago. This tends to happen after sustained increases, especially when it is to new all-time highs.
As a consequence of these processes, there is usually a stage of price consolidation, that is, a period in which it lateralizes in a range before continuing to rise. This is what is currently being seen, something that if maintained will represent a possible solid floor that drives demand promoting the rise.
“Drops are possible on the way to new all-time highs, and it is up to the community to be vigilant,” says Alejandro Estrin, country manager of OKX Argentina. Through a note sent to CriptoNoticias, the specialist warns that operators must be prepared for this situation.
“The rapid advance of the market means that corrections could be pronounced, even with the overall uptrend, so risk management is essential”
Alejandro Estrin, country manager of OKX Argentina.
The reduction in demand for bitcoin is also reflected by the market liquidity momentum index below. It tracks stablecoin minting, inflows into BTC exchange-traded funds (ETFs), and changes in futures trading.
This index has more than halved, from USD 15 billion, seen at the beginning of last month, to USD 7 billion. “This slowdown in liquidity growth may partly explain why bitcoin is struggling to maintain levels above $100,000,” comments Markus Thielen, founder of 10x Research.
BTC “catched up” to NVDA, analysts say
Added to this context, TheMarketEar analysts maintain that BTC, with the recent performance, “catch up” with the shares of the chip maker, Nvidia (NVDA). These assets have been mostly correlated since the market bottoms at the end of 2022. However, they had recently decoupled.
NVDA has been experiencing a pause in its bullish trend since late November, as the chart shows. But bitcoin did not experience this until last week, which may be due to its lower performance, according to TheMarketEar analysts. The chip manufacturer’s shares have seen an appreciation of 174% over the year, unlike BTC’s 120%.
Nvidia shares are a benchmark for the technology industry, so they serve as an indicator of sentiment about this sector. “They have few fundamentals in common, but are driven by a similar psychology,” the analysts explain.
With this outlook, it is possible that as soon as risk appetite resumes, bitcoin will reactivate its bullish trend. There are also factors such as the increase in inflation in the United States, according to the CPI report published today, that may keep demand in the markets subdued. Although it should be noted that the price reacted slightly upwards to this announcement, given that it went according to plan.
The markets also They remain expectant of the decision next week of the interest rates in economic power. Another cut in these would imply greater liquidity, which could motivate purchasing power, as long as it does not generate fears of recession.
It should also be noted that, according to leaks from Microsoft’s annual shareholder meeting that took place yesterday, they voted against the proposal to evaluate whether it will invest in bitcoin. Therefore, this adds to the factors that may be slowing down demand.
The bitcoin market’s eyes focus on 2025
Meanwhile, the end of the bullish cycle is not yet in sight. Different analysts agree that the peak of bitcoin’s current bullish cycle will be next year. The projections that abound indicate a target price between USD 120,000 and USD 150,000among other more ambitious ones.
According to Capriole Investment, a “rebalancing” of bitcoin against gold suggests that reaching $140,000 is likely “justified,” based on its historical performance comparison. Furthermore, due to the bullish impact that the currency has historically had after each halving, this projection is strengthened.
In this sense, there are specialists who do not rule out a rise to new historical highs in the remainder of December. However, the general consensus is that, beyond short-term performance, the market will continue to rise in the coming months if a black swan (unexpected event) does not occur.