- A dead cat bounce may still be in play.
- On-chain data shows signs of bullish momentum.
- There is uncertainty until Bitcoin closes above the $53k mark.
Crypto market shake-offs aren’t a novelty in the market and they spice things up for every type of investor. But don’t we all just love the excitement of whether Bitcoin will dump or rally to an ATH?
Bitcoin showed its trademark volatility over the weekend when it dipped below the $50k mark and bounced right off the $45k level. With that many mixed signals, it’s easy for investors to get lost in the noise. Thankfully, on-chain data and institutional investors’ buying behaviors help paint the bigger picture – of Bitcoin bulls dictating the move.
Data from CryptoQuant shows Bitcoin was over-leveraged. Shaking off over-leverage is the main reason why Bitcoin corrected, and Glassnode data shows the early December shake-off made the books with a market capitulation of $2.18 billion.
After the event, Bitcoin’s leverage ratio dropped by 22%, but not all lemons have fallen from the tree yet. Bitcoin’s Futures ETF will continue to increase the ratio level until another shake-off takes place. Industry consensus shows that Bitcoin might have reached a bottom, but not everyone is excited to buy into the dip just yet. The Wolf Of All Street said the bounce is a normal reaction to the dump. So, what to look for when checking if buying the dip is not a fakeout?
Fighting off the price misconception
There are two schools of thought. One holds that Bitcoin has bottomed out, and retail and institutions are eating up the dip, as they should in this scenario. Sentiment data shows the #buyingthedip hashtag trended on social media and coincided with a strong bounce.
However, during the Crypto Banter show, we highlighted that the current ‘bounce’ could not be validated just yet. The indicator we are looking for is Bitcoin closing or breaking the $53k mark. Why? If it doesn’t break $53k, Bitcoin will most likely pull back to $48k, and the dreams and hopes of a new all-time high (ATH) will go on hold until Bitcoin makes another attempt. What’s more interesting is that the Bitcoin wallets indicate where resistance levels are situated!
What is notable is that Bitcoin broke the macro trend cycle, so we’re expecting to see a prolonged bullish cycle. As such, Bitcoin is still primed to reach another ATH, but time will tell when it will happen. PlanB’s stock-to-flow model compares Bitcoin to a ball with an explosive buoyancy that has been kept underwater for too long.
When that happens, we expect a price explosion because the price of Bitcoin has always gone to new highs despite mini bear cycles.
Bitcoin and the crypto market are currently at the mercy of the stock market. As a result, things can shift rapidly, and Bitcoin can be affected by the actions of investors in traditional markets that are taking profits at the end of the year.
Before deciding to put a staple in the market direction, we need patience. First, the $53k level is a good indicator of whether Bitcoin is continuing up, or we’re seeing a dead cat bounce (which will take the price back below $50k). The second thing to watch is how well the market has managed to shake off the over-leverage, which continues to build up thanks to the Bitcoin Futures ETF.
That said, what can you do? Continue to HODL! Panic selling is the worst decision you can make. We believe Bitcoin will find its bullish pace again, and if you have been swayed into buying projects that are not blue-chip, now is the time to switch to projects with a bigger potential in the long term. If you have fiat, then this is a prime opportunity to load more bags, but be mindful of how much of your savings portfolio you allocate.