Bitcoin Battling to Break $38K Points to a Bearish Scenario and a Drop to $25,000

Key Takeaways

• Bitcoin has recovered by 143% since November 21, last year
• Strong resistance was encountered at $38,000, as indicated by the choppy price action
• Fundamentals remain modest, with the derivatives market still driving the price

Bitcoin’s three-week consolidation under $38,000 formed an ascending triangle formation as buyers are persevering pressure on this resistance level. This can be interpreted as a bullish formation with a lessening depth of pullbacks, indicating growing bullish sentiment.

On the other hand, the buyers may give up or encounter a stronger push from the seller’s side, causing a larger price drop. Will it break it or proceed to make a downturn is the main question?

Meanwhile, large whale transactions have been seen on-chain, indicating whales are getting ready. Bitcoin would be expected to make a determining move, but to which side? 

Bitcoin On-chain Data

Yesterday, November 23, according to an X post by Whale Alert, one whale moved 1,500 BTC worth 55,911,311 USD to an unknown wallet. 

Looking at the total transaction volume in USD data  from IntoTheBlock, we can see that the activity isn’t out of the ordinary and has been consistent throughout the year. Currently, it is sitting at $25B with a 7-day high of $34B. 

The highest recent spike, which was also its highest point this year, was $47,7B made on October 24 when the price of Bitcoin made its price spike to $35,000. This is the price point from which an ascending triangle was seen, but the volume didn’t follow the price rise and diminished. 

The number of large transactions also doesn’t show that more whales are entering the market as it moved in the same range throughout the year. So, what’s driving the market? 

Previous price spikes were mostly made due to short position liquidations – short squeezes, which we have reported in the past. As one analyst points out, the derivatives markets are in the bull’s favor. 

As observed by analyst Skew, there is an unloading of short perpetual futures positions and an increase in long positions bets. This shift could exert upward pressure on Bitcoin’s price, possibly overcoming the long-standing resistance near $38,000.

Another factor taken into consideration for a bullish case is Bitcoin’s seasonality. December is a seasonally strong month for Bitcoin, with an average gain of 12% over the last eight years as suggested by the data from Matrixport. 

BTC Price Analysis 

As we already covered in our previous BTC analysis, the price is in its ending wave from the larger uptrend that started on November 21 last year. It encountered strong resistance on October 24 when it first came to $35,000. Until November 6, it traded sideways before spiking for another 8.6% increase on November 9, reaching $38,000. This was also followed by sideways movement, which now lasted for 15 days. 

This choppy price action doesn’t instill confidence, but the wave structure implies that the pattern hasn’t been completed yet. The price has already entered its resistance zone, but another push to the upside is likely ahead, with its first target at $40,000 and its furthest at $44,000. 

However, an immediate sharp decline is expected as this will likely be driven by the derivative traders and potentially another short squeeze. If this move from November 21, 2022, was the first wave in Bitcoin’s bull market, then its first bull market correction should develop afterward. 

It looks like the ascending move the price attempts to make will pick up the sell orders above and complete the cause for a reversal. Also, considering Bitcoin’s seasonality, it usually means that the markets start to cool off after the holidays as the euphoria settles in.  

As we already discussed in some of our previous posts, the target for the expected correction depends on where this uptrend ends, but at its optimal point it should be around $25,000.

Conclusion

Bitcoin has recovered by 143% since November last year, and although we saw some correction in between, it was a steady inclination overall. As it approaches $40,000, the moves are getting smaller with choppy price action, indicating that this larger uptrend is near completion.

Fundamentally, there isn’t much reason to believe that the price can continue moving to the upside more sustainably; instead, the derivatives market mechanics drive it. 

Talking short-term, the price is putting pressure on its $38,000 renaissance, and a breakout to the upside is more likely at this point, but the upside remains limited. A move above $38,000 would mean that the sellers have gotten a better price to exit, and as most traders and investors are “in the money,” some profit-taking would be their logical step. 

Disclaimer

Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.