Bitcoin Price Analysis: Correction, Support Levels, and Future Prospects

Bitcoin (BTC) has entered a technical correction phase, dropping to $94,830 after a more than 12% drop from its peak earlier this month. Despite this decline, the cryptocurrency has found significant support at the 50-day moving average, indicating potential recovery in the market. The pullback occurred during a quiet trading period, as the holiday season is underway. Data from CoinGecko emphasizes that Bitcoin's trading volume on Sunday, December 29, was at $22 billion, significantly lower than the $41 billion recorded the previous day. This represents a significant decrease from the $45 billion volume on Friday, highlighting reduced market participation as traders take a break during the holiday season. Under normal conditions, Bitcoin often has a daily transaction volume exceeding 100 billion dollars. A lower than average volume indicates a lack of trust among traders, which may amplify price volatility during this period. Impact of Federal Reserve Reserve Policy The recent difficulties of Bitcoin may partly be due to the hawkish stance of the Federal Reserve earlier this month. The central bank's modest 0.25% interest rate cut and forecast of only two more cuts by 2025 have dampened market optimism. Previously, the Fed had hinted at the possibility of up to four rate cuts, fueling expectations of more accommodative liquidity conditions. This policy change has had a significant impact on risky assets, including cryptocurrencies, as tight monetary conditions often reduce investors' speculative investment demand. Challenges from ETF money flow and strategic reserves In addition to the obstacles of Bitcoin, there is a decline in ETF capital flows and a declining enthusiasm for the strategic Bitcoin Reserve Fund. Data from Polymarket shows that the likelihood of Donald Trump creating such a reserve fund in the first 100 days in office has dropped sharply to 29%, a significant decrease from the peak of 60% in November. Meanwhile, Bitcoin ETF has sold assets in six out of seven recent trading days, with a total accumulated net assets of $35.6 billion since its inception, according to SoSoValue. This slow performance highlights the waning interest of institutions, adding further pressure on cryptocurrencies. Can Bitcoin benefit from the January effect? The anticipated Santa Claus rally, often seen as assets increasing in value leading up to December 25, did not materialize this year. Investors are now pinning their hopes on what's known as the January effect - a phenomenon where financial assets increase in value in the first month of the year as market participants restructure their investment portfolios. However, historical data has signaled a contrary signal for Bitcoin. Despite this cryptocurrency bringing positive returns in January for six months in 2013, its performance has varied significantly. For example, it only increased by 0.62% in January 2023, but surged by 39% in January 2022. The interesting thing is that February tends to be a stronger growth month for Bitcoin, as this cryptocurrency has only recorded losses twice in its history during this period.

Technical analysis: Key support level and risk From a technical perspective, Bitcoin appears to be at a critical point. The daily chart shows that this cryptocurrency is holding steady above the 50-day moving average and the upward trend line originated from the lowest level since November 17th. Despite these bullish signals, the formation of an expanding wedge pattern - often seen as a bearish signal - poses risks. A breakdown below the lower boundary of this wedge could trigger a deeper correction, potentially pushing prices up to $73,777, marking the highest level in March 2024.

On the contrary, the recovery from the current level could push Bitcoin to retest the upper boundary of the $110,000 threshold, provided that the price momentum continues to strengthen in the coming weeks. Conclusion The recent price volatility of Bitcoin highlights the delicate balance between fundamental and technical factors shaping its trajectory. While technical support levels and potential for a January effect provide reasons for optimism, downward price patterns and macroeconomic instability may dampen the upward momentum. Investors should closely monitor key support levels, ETF flows, and overall market sentiment to assess the cryptocurrency's direction as we enter the new year. DYOR! #Write2Win #Write&Earn $BTC {spot}(BTCUSDT)