Bitcoin Struggles for Direction in Run Up to Christmas

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By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International (CSE:FNQ). 

 

Bitcoin (BTC) concluded the week at approximately $41,400, reflecting a 5.5% decline compared to the previous week’s closing value of around $43,800. The price experienced a notable dip on Monday, reaching a weekly low of about $40,225 before staging a strong recovery and surpassing the $43,000 threshold on Wednesday and Thursday. Over the weekend, negative price movements brought the closing price to around $41,400, with the downtrend persisting into Monday the 18th, as BTC broke below the $41,000 trading level.

This past week marked the first instance of a weekly price decrease after eight consecutive weeks of price appreciation, signalling anticipated market movements aimed at reducing market leverage. Approximately $345 million worth of long and short positions were liquidated during the week, with the majority of liquidations affecting long positions, totalling around $235 million. However, the strong uptrend price movements witnessed at various points in the week also led to approximately $110 million in liquidation of short positions.

High volatility is a typical outcome following periods of significant uptrends and downtrends, triggering a cascade of liquidations that reduce market leverage and contribute to a more sustainable price action and market environment. Traders often capitalize on moments of heightened volatility to attract liquidity and readjust their positions.

Bitcoin dominance, representing its market capitalization relative to the entire digital asset market, declined to 53.11% from 53.46% the previous week, indicating the robust resilience of altcoins compared to the leading digital asset during the recent downtrend. This suggests active investor engagement, as this pattern typically occurs when investors swiftly allocate capital across various altcoins in search of short-term profitability.

An analysis of daily volume on centralized exchanges, measured over a 7-day period from the 11th to the 17th of November, revealed a daily volume exceeding $36 billion. This represents the highest level recorded since March 2023, affirming strong trading activity that contributes to increased volatility.

Looking at the ETFs topic, the Grayscale Bitcoin Trust (GBTC) discount and Grayscale Ethereum Trust (ETHE) maintain a stable discount, standing at 9.9% and 13.7%, respectively. This underscores the unchanged confidence among investors regarding the likelihood of ETF spot approval and the subsequent conversion of Grayscale trusts to ETFs.

The final deadline for the SEC decision on the 21Shares BTC Spot Filing is scheduled for the 10th of January, with the comment window closing on the 5th of January. The 6-day window from the 5th to the 10th of January is when the SEC is expected to provide a final approval or rejection for the 21Shares filing, coinciding with a cascade of approvals or rejections for other BTC filings. Analysts continue to predict a 90% probability of receiving a green light from the SEC.

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