Bitcoin (BTC) begins an important week in the macro markets, with the weekly close leading to a sharp 7% BTC price correction.
The largest cryptocurrency collapsed towards $40,000 amid fresh volatility, reaching its lowest level in a week.
Arguably, Bitcoin’s long-delayed return to testing support surprised the nonetheless bullish laggards, liquidating nearly $100 million in long positions.
This sharp move provides a rude awakening for BTC investors at the start of a week that already has numerous potential volatility triggers. This comes in the form of US macro data coming just before the Fed’s next interest rate policy decision.
A surge of numbers in rapid succession means anything can happen to any risky asset, and cryptocurrencies are no exception.
Meanwhile, following its first mining difficulty adjustment in three months, Bitcoin appears to be finally cooling down after weeks of virtually unchecked gains.
What could happen before the year is out?
Traders and analysts alike are bracing for a curveball leading up to the close of the 2023 candle, and with just three weeks remaining, BTC price action has suddenly become much less certain.
Long positions eliminated due to 7% BTC price correction
Bitcoin volatility reemerged shortly after the weekly close was completed, following a flat weekend.
However, this time the bulls suffered as BTC/USD fell more than 7% in a matter of hours to bottom at $40,660 on Bitstamp. This included a 5% drop in a matter of minutes. Cointelegraph Markets Pro and TradingView are shown.
The sudden economic downturn that hit the “up only” trading environment hard was not an expected outcome for leveraged long-term traders.
At the time of this writing, liquidations on December 11 stood at $86 million, according to data from statistics resource CoinGlass. On this day, the liquidation amount of cross-cryptocurrency purchases exceeded $300 million.
A significant BTC price correction was already expected. As the popular cryptocurrency saying goes, nothing goes straight up, and seasoned market participants were not shy about expressing their relief.
“The daily and weekly closing price was $43,792. The fullback is normal and even healthy. “Hourly fluctuations mean nothing.” Popular Critic BitQuant said Some of his reactions are from X (formerly Twitter) subscribers:
The accompanying chart still predicts a new high, targeting $48,000 during the week.
Michaël van de Poppe, founder and CEO of MN Trading, also urged calm, especially for frustrated altcoin traders.
“There is a correction in the market and with altcoins it will deepen because the market is illiquid.” reasonable.
“Don’t stress. Bitcoin momentum is slowly coming to an end, which will allow Ethereum to easily dominate the next quarter.”
Most of the top 10 cryptocurrencies by market cap followed the BTC/USD decline and did not recover much to remain 4-6% lower over the past 24 hours.
Before the volatility, trading suite DecenTrader noted that funding rates were rising quickly. This is a classic signal to prepare for an unstable situation.
#Bitcoin The funding rate was flat while moving up to $44,000, but is now rising rapidly as the price has fallen sideways. pic.twitter.com/QzjDKBA1K4
— Decentrader (@decentrader) December 11, 2023
Over the weekend, DecenTrader founder Filbfilb was among those looking for potential profits from the retracement.
“Let me be clear, there has been a huge uptick this year… and a correction is due (from 16,000!!). I really hope so. So this is definitely not a buy call,” he said. wrote In X thread.
“A correction for serious falsehoods would be admirable, but it is overdue.”
Filbfilb said a return to even lower levels, especially $25,000, is “so low that some kind of global disaster would have to occur.”
Fed FOMC meeting headlines intense macro week.
Next week will be a rare style of US macro data release, purely due to timing.
The November Consumer Price Index (CPI) and Producer Price Index (PPI) will be released on December 12 and 13, respectively. The latter is announced on the same day that the Federal Reserve decides to change interest rates.
Despite their overall importance, the previous data printout is too late to have a direct impact on policy, but the Fed already has several other printouts showing that inflation is decreasing.
An exception occurred last week. Unemployment figures show that limited fiscal conditions are still not holding back the labor market as much as expected.
However, the market roadmap is clear. This month, the Federal Open Market Committee (FOMC) will leave interest rates unchanged and cut rates in mid-2024. According to data from CME Group’s FedWatch Tool, this prediction is almost unanimous at 98.6%.
“The most recent Fed statement was that hopes for a rate cut were ‘premature,’” financial commentary source The Kobeissi Letter wrote in a comment to a weekly macro calendar post on X.
“We expect the Fed to tighten it this week.”
Key events this week:
1. CPI inflation data for November – Tuesday
2. OPEC Monthly Report – Wednesday
3. November PPI inflation data – Wednesday
4. Fed interest rate decision and statement – Wednesday
5. Retail Sales Data – Thursday
6. First Unemployment Claim – Thursday
Volatility…
— Kobeissi Letter (@KobeissiLetter) December 10, 2023
The FOMC decision will be followed by a speech and press conference from Federal Reserve Chairman Jerome Powell, a classic source of volatility in risk assets, and more job losses in the days that follow.
On-Chain Data Warning for Over-Scaled Bitcoin
Following Bitcoin’s plunge, analysts have been keen to flag early warning signals that can be used to identify similar incoming events.
at lineCryptoQuant, an on-chain analytics platform, has noted no fewer than four data sources calling attention to the weekly close.
Among them is the Stablecoin Supply Ratio (SSR) indicator, which shows widespread willingness to switch from stablecoins to BTC at high levels. This is a classic sign of potentially unsustainable optimism.
“From January 2023 to December 2023, the Stablecoin Supply Ratio (SSR) increased significantly. This means that Bitcoin has a relatively higher value compared to stablecoins, which indicates that market participants are placing greater value on Bitcoin, which has been the driving force behind the rise in Bitcoin prices. .” wrote contributing analyst Minkyu Woo in one of CryptoQuant’s Quicktake market updates on December 12. 9.
“However, historically some investors have preferred to convert Bitcoin to stablecoins, which suggests there could be a short-term price correction in Bitcoin.”
The day before, fellow contributor Gaah noted that more than half of the current BTC supply is at a profit compared to when it was acquired before the adjustment.
“Every historical moment this indicator has entered this field has signaled Bitcoin’s distribution to regional highs or major highs,” he warned.
Profit supply in percentage terms reached nearly 90% this month, the highest since Bitcoin hit an all-time high in November 2021.
Difficulty dip brings “welcome relief” to miners
The latest Bitcoin mining difficulty adjustment stands out against months of new all-time highs.
According to data from BTC.com, the bi-weekly adjustment just prior to the BTC price drop saw the difficulty decrease by about 1%.
This was the first downward adjustment since early September, and the first change since then without added block grant competition.
James Van Straten, a research and data analyst at cryptocurrency insights firm CryptoSlate, initially gave pause for thought, but there’s no reason to worry.
“The first negative difficulty adjustment for Bitcoin since September comes as welcome relief to miners. This ends six consecutive positive corrections,” he said. reacted At X.
As Cointelegraph reported, miners have experienced increased fee revenues thanks to increased competition, increased hardware deployment, and on-chain ordinal inscriptions.
I believe we are at a new beginning #Bitcoin Bull running.
Miner profits began to rise above the 365DMA that occurred during the previous bull market.
Miners are flying and ETFs will act as a further catalyst. Another reason why stock prices should continue to rise pic.twitter.com/5TltWkGIAv— James Van Stratten (@jimmyvs24) December 8, 2023
All of this comes ahead of April’s block grant halving, when block grants will be cut by 50%. Previously, DecenTrader’s Filbfilb suggested that miners might want to stockpile BTC ahead of the event to help with positive supply dynamics and even provide the pre-halving BTC price of $48,000.
Still wondering, “Can I get to $48,000 quickly?”
Amid short-term Bitcoin strength, the appeal of $48,000 still remains.
Related: Bitcoin shed nearly a week’s worth of gains below $41,000 in 20 minutes.
Over the weekend, this was reinforced by on-chain data, which reinforced the notion that $48,000 could act as a price target.
The report, produced by on-chain analytics firm Glassnode, found that a “cluster of newly identified addresses” were last purchasing large quantities of BTC at an average price of $48,050.
Glassnode’s Entity Reconciliation URPD metric, which tracks the average price and volume at which purchases are made, shows that this cluster of addresses is responsible for the second-largest purchase discovered to date, at 633,120 BTC.
“We will get to $48,000 quickly,” said X user MartyParty, a popular analyst and host of Crypto Spaces. responded.
Meanwhile, DecenTrader shows most of the leveraged short liquidity lying between the current spot price and the $48,000 mark.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.