December will likely be remembered by Bitcoin’s (BTC) fake breakout above $18,000, but apart from that brief overshoot, its trajectory was entirely bearish. In fact, the downward trend that currently offers an $18,850 resistance could bring the BTC price below $16,000 by mid-January.
A handful of reasons can explain the negative movement, including the reported withdrawal of Mazars Group auditing firm from the cryptocurrency sector on Dec. 16. The company previously handled proof-of-reserve audit services for Binance, KuCoin and Crypto.com.
Additionally, one can point to the bankruptcy of one of the largest cryptocurrency miners in the United States, Core Scientific. The publicly listed company filed for Chapter 11 bankruptcy on Dec. 21 due to rising energy costs, increasing competition, and the Bitcoin price crash in 2022.
The liquidity crisis at the crypto lender and trading desk Genesis Global and its parent company, Digital Currency Group (DCG), sparked fear among investors. More importantly, DCG manages the $10.5 billion Grayscale Bitcoin Investment Trust (GBTC). The fund is currently trading at a 47% discount to its net asset value in part due to investor speculation on its exposure to Genesis Global.
Negative pressure from the U.S. Federal Reserve tightening movement
Apart from the bearish newsflow, the macroeconomic scenario deteriorated after the U.S. Federal Reserve hiked interest rates by 50 bps on Dec. 14. Analysts, including Jim Bianco, head of institutional research firm Bianco Research, said that the monetary authority would maintain its tighter monetary policy in 2023.
Investors fear that Bitcoin could break below the current descending trend support at $16,100, triggering a sharp correction. TH3 Cryptologist, a veteran crypto trader, points out a descending wedge potentially causing a $14,000 low by February 2023.
On daily TF I can see this shaping out to be a descending wedge with a potential bottom forming at 14k area. $btc #bitcoin pic.twitter.com/dpPVZZy5Vk
— TH3 Cryptologist (@TH3Cryptologist) December 29, 2022
But let’s also look at Bitcoin derivatives data to understand if the price action and recent news have impacted crypto investors’ sentiment.
Bitcoin buyers’ demand using leverage are yet to be seen
Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the…
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