Bitcoin price has undergone a technical correction, dropping by over 12% from its recent high, and finding support at the 50-day moving average. The decline occurred in a low-volume environment during the Christmas season, with Bitcoin’s daily volume dropping to $22 billion on Dec. 29 from $41 billion the previous day. The loss of momentum in Bitcoin can be attributed to a hawkish monetary policy meeting by the Federal Reserve earlier in the month, as well as doubts about a Strategic Bitcoin Reserve and sluggish ETF inflows.
The Santa Claus rally failed to materialize for Bitcoin, but investors are hopeful about a possible January effect. This theory suggests that financial assets, including Bitcoin, rally in the first month of the year as participants create their portfolios. However, historical data does not show significant gains for Bitcoin in January. The coin was positive six times since 2023, with gains of just 0.62% last January and 39% the year before. February tends to be a strong month for Bitcoin, with only two instances of negative movement.
Bitcoin’s current price is at a crucial support level, hinting at potential gains in the coming weeks. The coin has found support at the 50-day moving average and has not breached the ascending trendline connecting the lowest swings since November. However, there is a risk as Bitcoin has formed a rising broadening wedge pattern, which is a bearish sign. A drop below the lower side of the pattern could lead to further downside, potentially to $73,777, its March high. Alternatively, a rebound could see Bitcoin retesting the upper side of the wedge at $110,000.
In summary, Bitcoin has experienced a technical correction and a decline due to various factors such as the Federal Reserve’s monetary policy meeting and doubts surrounding a Strategic Bitcoin Reserve. The lack of a Santa Claus rally has prompted hopes for a January effect, but historical data shows mixed results for Bitcoin in January. The coin’s current price is at a crucial support level, with the potential for both upward and downward movement based on the formation of a rising broadening wedge pattern. Traders and investors will need to monitor Bitcoin’s price action closely in the coming weeks to determine its next move.