The following is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive this and other on-chain bitcoin market analysis straight to your inbox, Subscribe now.
Bitcoin saw a slight reversal of its ongoing rally during the final months of 2023. This price fluctuation may nevertheless suggest a bull market ahead as the asset finds new backers.
Throughout its history, Bitcoin has been an extremely fluctuating asset. In the almost 15 years since the Genesis Block was mined, its highest valuations have always been the result of dramatic spikes, and the fall from those peaks has always been about as steep. Nonetheless, he always showed a strange tendency to find himself in a better situation once the dust settled. This volatile nature has even been seen as positive in many ways, because it reinforces a central truth for Bitcoin: it is ultimately a currency, with a new vision for how economic relations should work in the society. Bitcoin has gained a lot from those who want to treat it as a pure investment asset, but these people cannot form the core of the community.
All this to say Bitcoin prices fell on December 11 after a prolonged bull market that lasted several months. Generally driven by positive buzz around federal regulatory approval of a Bitcoin ETF, the price has continued to rise despite setbacks like the change of CEO at Binance, the industry’s largest exchange. Despite the appearance that this new rally could withstand shocks that would have been significant even a year ago, its invincibility could not last as the price fell almost 6% between midnight Sunday and the time of writing these lines. As the price hovers around $41,000, a notable development is the apparent lack of fear from all corners of the Bitcoin world.
Bitcoin Magazine Pro is a reader-supported publication. To receive new posts and support our work, consider becoming a free or paid subscriber.
While it may seem quite common for more die-hard Bitcoiners to view any price drop as a “healthy correction” or a cooling time for an “overheated” market, even more mainstream financial media like Barron’s to have claims that “tea leaves in crypto derivatives always indicate bullish animal spirits.” Mainly speaking to a series of potential catalysts, the estimated weekly drawdown seems to only indicate why this setback is minor. FxPro analyst Alex Kuptsikevich said in part: “A wave of profit-taking hit the cryptocurrency market Monday morning…we saw a massive exit from long positions amid low liquidity…Strong demand for Risky assets in traditional markets suggest that the market will attempt to return to its previous growth trajectory.
These long positions in particular are at the heart of the recent economic downturn. After months of success, indirect investors have shown particular interest in risky investments. Paris regarding Bitcoin: these investors had more courage to start futures contracts on highly leveraged positions. Although bets like this are easier to set up and make money without higher startup capital, they would be automatically liquidated if bitcoin suddenly fell. A sharp drop in prices quickly wiped out some $330 million of these bets, a figure that bloated to 500 million dollars the next day. These leveraged positions appear to be the biggest casualties of the price decline so far.
In other words, as analysts were quick to point out, the market was simply too hot. A series of The figures Add weight to the claim that Bitcoin’s success encouraged these risky bets: not only did the bull market enter historically unstable rates for the first time since before the bull market, but other factors like mining difficulties serve as a canary in the coal mine. With the next reduce by half Becoming more and more imminent, miners are not able to expect a continued scenario where mining rewards will increase faster than mining difficulties. But this is exactly the scenario that is playing out.
So, even if some experts have claims If this cooling period can continue to last for a month or more, the overwhelming consensus is that Bitcoin price will return stronger than ever in the very near future. But why is this? Of course, a small setback for Bitcoin doesn’t seem to hurt anyone except overleveraged futures traders, but what can justify the real belief that, as CNBC Put the, “Is there still a lot of momentum left in the current Bitcoin uptrend?” The answer comes from the same thing that created this momentum: real belief in the Spot Bitcoin ETF.
The last weeks rumors that the main ETF candidates were on the verge of a breakthrough in their negotiations with the SEC turned into new negotiations: BlackRock in particular extended a new invitation for Wall Street’s biggest banks to join the action. BlackRock requested a change in the ETF protocol of their proposals, allowing certain authorized participants to use cash instead of bitcoin to invest. Given that some major banks are prohibited from directly holding Bitcoin or other digital assets, this change directly opens the door to some of the biggest players in the industry. An offer like this further seems to suggest that BlackRock’s negotiations with the SEC have stabilized to a new degree.
Additionally, Google has also updated its advertising policies, quietly making changes to a platform that has historically shown great skepticism towards Bitcoin-related products. With some caveats, Google will now allow “Cryptocurrency Coin Trusts” to be advertised to users in the United States, specifically stating that financial assets representing real digital currency are fair game. In addition, Google has even relaxed its strategy for controlling violations of this type, transforming the immediate suspension into a 7-day warning. Such changes surely seem to suggest that the search engine giant is also expecting approval soon.
In other words, this setback is just a natural part of the Bitcoin lifecycle, and bitcoiners welcome it. Sometimes the currency’s runaway success attracts newcomers who don’t fully understand that bitcoin’s volatility is twofold. Traders viewed overleveraged positions as a cheap way to potentially make large sums of money from rising Bitcoin prices, and now a temporary setback has caused hundreds of millions to evaporate. But this is nothing new. Downturns like this keep the market from growing too unsustainably for too long and ensure that anyone who has been interested in Bitcoin for a very long time will enjoy more than a quick chance at profit. Bitcoin’s ability to soar is what attracts people, and the precipitous declines are what temper their expectations. Thanks to all these movements, Bitcoin is only gaining strength.