Bitcoin has made an impressive leap of 4% recently, thanks in part to the enthusiasm of the ‘Christmas Rally,’ where traders are feeling a festive spirit reminiscent of secret Santas in the market. But beneath this apparent cheer, psychological risks are still lurking, preventing a fully-fledged bull rally.
Just ten days ago, Bitcoin [BTC] reached a new all-time high (ATH) of $108K—an impressive number it has been striving for since the so-called “Trump pump.” While market signs indicate that it isn’t overheated and greed remains comfortably below the 90 mark, concerns have spiked following the FOMC warning of a “cautious” 2025. This juncture led to a noticeable decline in BTC, erasing much of the gains from the hectic last moments of the election cycle.
With a potential correction looming, many investors opted to cash out at the $94K price point, leading to a staggering $7.17 billion in realized profits. Although it may appear as a step backward, the exit of what’s often referred to as “weak hands” can pave the way for fresh players looking to seize available supply—an encouraging sign for the future.
As Bitcoin slowly inches back towards $100K, one must wonder: is new capital genuinely returning to the market, or is the memory of the recent decline still vivid, making investors hesitant?
The landscape has shifted for risk-averse investors. Following the substantial cash-out, Bitcoin exchange reserves climbed to 2.427 million, marking their highest point since November. Indicators showed that short-term holders’ SOPR hit 1.04, pointing to the trend where those with less than five months of exposure were cashing out to lock in profits. Additionally, inflows into exchanges reached a five-month peak, with a striking 21K BTC deposited at an average price of $98K.
Consequently, BTC dipped to $92K, marking its lowest point in over two weeks, with the $94K level acting as a clear profit-taking zone. Just as it appeared things were headed downward, a sprinkle of holiday cheer brought about a 4% jump, propelling BTC back into the $98K-$100K range.
Despite this recovery, institutional demand via Bitcoin ETFs has shown sluggishness, continuing a streak of outflows lasting four days. This trend indicates that the current price levels haven’t yet drawn significant capital from institutions. On the retail front, buying activity has increased, but not at a volume sufficient to denote full “accumulation.” As excitement builds for the New Year, Bitcoin may hover between $100K-$105K, yet the prospect of a new ATH still seems a distant dream.
The risk factor remains crucial. The memory of the recent declines lingers, which may hinder new capital inflow since psychological resistance has a strong grip on investor sentiment.
So, what does this mean for Bitcoin’s trajectory? Historically, the first quarter has been a bullish period for BTC, often reflecting a supply shock driven by an imbalance where limited supply meets heightened demand. Nonetheless, given current metrics, it wouldn’t be shocking to see Bitcoin deviate from its usual patterns.
External pressures are mounting, and the absence of clear economic indicators could present challenges for 2025—even with optimistic metrics on the blockchain. Unless Bitcoin conquers its previous ATH by mid-January, proclaiming a bull rally might be a tad premature.
Without robust retail and institutional capital backing, even significant players like MSTR could struggle to spark a rally. Instead, a phase of consolidation around the $95K–$98K range might just provide the financial stamina Bitcoin needs to gear up for the next major upward trend. This strategy could keep risk-averse investors engaged by tightening their profit margins while rekindling that all-important FOMO, setting the stage for a rally that could carry us into the coming weeks.