Bitcoin Seeks New Direction Amid December Consolidation: What Levels to Watch

{Bitcoin} continues to consolidate using the $42,700 average level in December as a pivot level. Which direction could the world's largest cryptocurrency move next?

Let's begin by examining Bitcoin from a broader perspective on the weekly chart. Within the context of 2023, Bitcoin operated within an ascending channel, encountering resistance at the upper band of the channel in December.

Conversely, a contrasting chart pattern emerged during the September-October period. During this timeframe, Bitcoin exhibited a marginal horizontal uptrend for a month, finding support in the lower band of the channel. Following this, a surge in demand, fueled by spot Bitcoin ETF news, resulted in Bitcoin gaining over 60% in value over two months.

Currently, there's an observation that the impact of the spot ETF news for Bitcoin has largely been factored into the market. As the year concludes, the expectation is that Bitcoin's consolidation phase may persist over the next 10 days, particularly considering corporate companies reassessing portfolios as part of their New Year plans.

The initial month of 2024 is anticipated to be dynamic for Bitcoin. Market expectations hinge on the approval of the spot ETF product in the second week of January, presenting an unaccounted-for stress factor in the cryptocurrency realm.

While a negative decision or further delay by the SEC seems improbable, potential panic selling could ensue if it materializes. Recent updates on applications have also introduced some uncertainties.

The incorporation of a fiat currency option in ETF redemption introduces the risk of the investment vehicle overly concentrating on Bitcoin prices. This might impact investors' enthusiasm for the product, and persistently low trading volumes post-launch could be a catalyst for Bitcoin sell-offs. Additionally, if the market tendency to buy the expectation and sell the realization recurs, the Bitcoin market may exhibit a mixed course.

Nevertheless, a holistic assessment underscores the prevailing positive sentiment towards the cryptocurrency market, especially Bitcoin. Despite this, it's imperative not to overlook associated risks.

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Examining Bitcoin from a technical standpoint reveals a persistent struggle for the price along the upper band to breach the $44,000 threshold over the past three weeks. Any resulting selling pressure could lead to a weekly close below $42,700, signaling a descent into the lower region.

The recurring role of this pivotal level as resistance might bolster downward momentum, indicating a potential correction extending to the $36,500 - $37,000 range. Along this trajectory, the $39,400 band could serve as an interim support, with the likelihood of an acceleration in the correction beneath this value. The Stochastic RSI, consistently signaling oversold conditions on the weekly chart, reinforces seller confidence by dipping below 80 below $39,400.

In a bearish scenario, a decline to the $36,000 region and the ensuing support becomes pivotal. Notably, this juncture could position Bitcoin for a robust rebound, attracting more investors post a limited correction.

Alternatively, a bullish trajectory may unfold with the preservation of $42,700. If the buying side successfully maintains Bitcoin above this pivot level, it could initiate a consolidation phase, paving the way for a move towards the next target of $48,900. In essence, the long-term chart underscores the critical significance of the $42,700 average level in determining the cryptocurrency's new direction.

A closer examination of the uptrend that originated in October, as depicted in the daily chart, highlights the persistent interaction with Fib 0.144 in Bitcoin's horizontal trajectory. The price, currently hovering around $41,500, has found support from purchases below, with particular significance placed on the 21-day exponential moving average serving as dynamic support. Conversely, sellers remain focused on the $44,000 threshold.

In the short term, Bitcoin's attempt to reclaim the uptrend this week underscores the importance of closing within the $44,000 band for trend continuation. Failure to do so, coupled with a breach of the 21-day EMA value beneath the pivot level and a subsequent break of the second support line around the $39,000 region, could propel the movement towards the $36,500 level, evident in the daily chart with the 3-month EMA value.

In summary, the $44,000 level emerges as the linchpin for reaching the next target in the $48,000 region. The immediate support line within the $42,000 - $42,700 range assumes a pivotal role in hindering a consolidated downward movement.

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Disclosure: The author holds no positions in any of the securities mentioned.