Short-term trend uncertainty is high
Bitcoin prices weakened significantly by the end of the weekend, dropping $2,000 in two hours and briefly falling below $88,000, before rebounding above $90,000. However, short-term traders remain cautious about Monday's trend. Analyst Killa pointed out that Monday often determines the important high and low points for the entire week. If there is no rise over the weekend, Monday is more likely to form the 'low point of the week'; but if there is a big rise over the weekend, Monday is more likely to form the 'high point of the week'.
At the same time, this week's focus remains on the upcoming FOMC meeting of the Federal Reserve (Fed). The market is generally betting that the Fed will announce a 0.25% interest rate cut, an event that has historically been a significant risk point for the cryptocurrency market. Historically, Bitcoin often suffers selling pressure in the lead-up to the FOMC meeting, rebounding sharply after the decision is announced.
Analyst Michaël van de Poppe predicts that the market's nervousness before the FOMC might cause prices to retreat to around $87,000, but if the interest rate policy leans towards easing, a quick rebound above $92,000 is expected, potentially even launching an assault towards $100,000 in the next two weeks.
Market structure like the winter of 2022.
Short-term technical instability is just one part of the many pressures Bitcoin is facing. Glassnode's latest report indicates that the market is showing structural signs similar to the early stages of the 'crypto winter' in 2022, including 'increased risk of high-position buyers surrendering' and 'continued accumulation of loss supply.'
Currently, over 25% of the circulating Bitcoin is in a state of unrealized loss, with the seven-day average loss supply reaching 7,100,000 coins, nearing the upper limit of the bear market range from early 2022.
The open interest in the futures market has been declining since November, indicating a rapid cooling of market risk appetite, and the leverage levels of perpetual contracts have also cooled significantly, reflecting that traders are retreating.
Off-market signals are equally weak. ETFs continue to show net outflows, especially as IBIT has seen redemptions for six consecutive weeks, marking the longest negative cycle since its listing. The active buying indicator (CVD) in the spot market has declined, and premiums across major exchanges have weakened again, indicating insufficient institutional buying momentum. Even in the options market, investors appear particularly cautious, with a tendency to buy put options for hedging appearing repeatedly in recent weeks. Although there has been slight easing, overall sentiment has not reversed.
The current market correction is an overreaction.
However, despite the market seemingly shrouded in a pessimistic atmosphere, some participants believe that the current correction resembles an 'overreaction' rather than a fundamental reversal. K33 Research's latest viewpoint points out that Bitcoin has entered a strong support range, market leverage is low, there are no large-scale liquidations, and although ETF flows are weak, they are not out of control. These signals indicate that the price decline does not represent structural damage.
K33 further emphasizes that market panic is exacerbated by some 'distant risks', such as quantum computing, Tether stability, or certain companies potentially liquidating Bitcoin, and these issues are still years away from causing real impact.
In contrast, the upcoming policy and institutional changes may provide substantial support for the market. The U.S. retirement plan (401k) may allow for cryptocurrency allocations, the Federal Reserve's QT slowdown and rate cut cycle, and declining funding costs could all become significant drivers for Bitcoin's upward movement from December to early next year. K33 therefore believes: 'Rather than worrying about an 80% crash reoccurrence, the market should focus on the current signals of bottom formation.'
Overall, Bitcoin is at a bottleneck where bullish and bearish forces are fiercely intertwined: short-term fluctuations are influenced by macro events, signs of recession prompt investors to hedge; mid-term structures indicate limited leverage risk, with selling pressure gradually being digested; long-term fundamentals are gradually improving due to enhanced institutional demand. Under this interwoven array of signals, the market's uncertainty indeed increases, but it also suggests that December may be a key month for re-establishing price direction.
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