Bitcoin is set on a path towards growth and development, but it will take more effort to sustain the gains as well. While digital gold has taken some very important strides over the past few months, causing many investors to start considering how to buy Bitcoin with bank transfer again, the prices have been recording both highs and lows. Most investors are convinced that a bullish market is imminent, and all it takes is one final nudge to push Bitcoin over the edge and into very robust gains.
Price correction
December 9th and 10th have been relatively flat for Bitcoin, and the price strength was momentarily threatened, especially as altcoins seemed to be moving closer to high points. The bulls suffered losses as the BTC/USD fell by roughly 7% in a mere few hours. The price plummeted to $40,660. 5% of the drop occurred in just a few minutes according to the most recent data.
This is noteworthy because the Bitcoin environment has been consolidating for quite a while now. This downtrend was the one irregularity in an ecosystem that has lately been based on nothing but upswings. Leveraged long traders did not expect this sudden change, which caught them unprepared and contributed to even more losses.
However, others were anticipating a price correction following the long days of upward trends. The general consensus is that growth is never linear in the crypto environment and that it’s important to remain prepared and expect the unexpected.
Macroeconomics
Although the Bitcoin environment is not that young anymore, it still remains relatively vulnerable in the face of internal and external changes. Price fluctuations are primarily dependent on macroeconomic volatility. This is precisely why traders tend to stress the importance of following the news and being aware of the changes that occur in either politics or the financial environment, as well as their potential effect on the cryptocurrency environment.
The United States has recently been at the center of a significant macro data release. The Consumer Price Index and the Producer Price Index were released one after the other on December 12th and 13th, respectively. The latter comes on the same day as new announcements regarding changes in interest rates, a crucial topic for BTC price changes throughout 2023.
Unemployment figures show that the restrictions imposed on the financial conditions were still insufficient to get the desired results and help suppress the labor market to the predetermined levels. The Federal Open Market Committee doesn’t have any changes planned for December or for the beginning of 2024, for that matter. Yet, additional cuts are expected towards the middle of the following year.
Removed gains
The cryptocurrency marketplace is perhaps best known to the general public for its volatility, with the prices changing in a matter of hours, if not sometimes minutes. This creates a relatively competitive environment in which many people don’t feel comfortable. If you’re highly averse to risks, the cryptocurrency environment isn’t the best place for you. Or, you can start off gradually and get more comfortable with the risks over time. On December 11th, the price suddenly dropped by 6.5%, swiftly wiping away almost a whole week of gains. However, it later regained some of the losses, trading higher than the low levels but still below the initial ones.
According to investors, this isn’t necessarily a cause for concern, as Bitcoin still maintains good support between $40K and $37,500. If this level remains intact, then the upswing towards the area between $50,000 and $51,000 will continue. However, that doesn’t mean that the drop didn’t have any repercussions. Data shows it caused almost $270 million worth to be liquidated, all in long positions. Open interest also suffered, as roughly $1.2 billion in BTC disappeared.
Reasons for optimism
Although the market remains changeable and subject to twists and turns, it’s important to remember that Bitcoin has, overall, enjoyed a stellar performance throughout 2023. This is especially the case when you consider the very low lows it had to wrestle with throughout 2022. Back then, many investors had no choice but to abandon their portfolios altogether to minimize future risks and ensure they didn’t lose even more money.
Since January 1st, Bitcoin has managed to rally by more than 150%, seemingly doing away with the stagnation and crypto winter that had the environment under its yoke for the better part of 2022 in one fell swoop. Much of the rally has been fueled by the promise of Bitcoin-backed exchange-traded funds, an asset class that could help cryptocurrencies grow and thrive. It would also mean that they are formally entering the world of traditional finance and taking a first step into being accepted as mainstream holdings.
However, the SEC has so far not come with a definitive ruling on the matter, leaving investors to speculate on when they might get an answer. At the moment, the official consensus is that the end of January is the most likely time. If this turns out to be correct, it could mean that BTC will record a very robust upward trend during the first quarter of 2024. Add to that the fact that the next halving is expected sometime in April, and the path seems laid for Bitcoin to enjoy considerable growth.
Mining
Mining is the process through which new coins are created, and transactions are validated. At the moment, the ecosystem is dealing with a difficult adjustment that will see it standing out against the previous months of all-time high levels. This is one of the first downward trends the environment has dealt with since September. However, this hasn’t created additional competition for block subsidies compared to previous movements in this area.
While it might seem like a bad thing, it is, in fact, a relief for miners. Many had been waiting for this respite that would put an end to the past consecutive adjustments. Over the past few months, miners have been dealing with severe competition, as well as the growth of hardware deployment. Fee revenues have also grown because of the Ordinals. In April, blocks will be halved, and subsidies will be left at 50% of their current value.
2023 has been a busy year for Bitcoin, but it seems now that 2024 might succeed in surpassing it. However, if all turns out well, there will also be rewards.
