Essentially, BTC and crypto prices are down because of two reasons. First, the US Dollar moved strongly higher, pushing markets and crypto lower. Second, Bitcoin’s 3-month cycle suggested a local top on December 19th.
While it’s no fun to see the price of Bitcoin drop 12% in 72 hours, it was an inevitable situation.
Here are the 2 reasons why the price of Bitcoin is dropping, and why crypto prices are down. Moreover, there is a psychological effect ($100k) at play which we explain as well.
Long term, we remain bullish as explained in our latest Bitcoin price prediction research. Short term, BTC is clearly vulnerable as the BTC price drop started right at an important point in Bitcoin’s 3-month cycle (see below).
BTC price down: It’s the 3-month cycle
The price of Bitcoin hit a local top on December 18th, one day before December 19th.
Why do we emphasize December 19th?
Because it was expected to be a local top in this current 3-month cycle.
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As seen below, when looking at the price of Bitcoin through the lens of 3-month cycles, there are some important observations:
- The price of BTC started rising on the 10th of October. See yellow arrow. That’s 10 days into the 3-month cycle.
- History has shown that 3-month cycles tend to have symmetric dynamics, certainly when there are strong trends.
- Consequently, the uptrend within this 3-month cycle was expected to end 10 days before the end of the cycle. With X-mas, our calculation suggested a local top on December 19th.
The chart featuring the BTC price drop says it all.
This was the first sentence of our premium crypto research alert sent to premium members on Dec 10th:
As said multiples times in recent weeks, the time window Dec 9th – 19th would likely provide resistance for crypto markets; a local top in BTC was the predicted outcome.
The 3-month cycle chart, one of the 7 BTC chart variations we track for our members, had the answer.
USD up, Bitcoin price down
The second reason why the Bitcoin price is down has to do with USD strength.
As seen on the next chart, the USD rose sharply in recent days, following the FOMC rate decision:
US Federal Reserve Rate Cut: Powell caution about ‘further cuts’ sent stocks diving
The USD chart broke out yesterday, clearing its important 50% Fibonacci level. That’s too much strength for BTC to stay strong. A Bitcoin price drop combined with a broad crypto market drop is the expected outcome.
Bitcoin down after hitting a psychological level
Another aspect that plays an important role is the importance of the $100,000 level.
It’s a psychologically very, very important level.
In fact, the $100k level is the point from where accelerated moves start, in both directions.
While BTC was rising, well above $100k, it is fair to expect that market volatility will result in the opposite effect.
Whatever happens around psychologically important levels is amplified – both a BTC price rise and a Bitcoin price drop are both strong around a critical level like $100k.
It will take a little longer before BTC decisively takes out $100k. That’s not a bad thing though, as the recent rally was a little too steep and obvious, leaving too many bulls in the arena; that’s not a recipe for a sustained move higher.
What’s next for Bitcoin?
While it insightful to understand what happened in the past (“Bitcoin price dropping – what happened“), it is more important to understand what it means for the future.
What’s next for Bitcoin?
Frankly, we believe holiday season will be choppy for BTC and crypto markets.
- No, we are not predicting a crash.
- But also no bullish continuation.
Bitcoin, similar to altcoins, need to digest, the recent rise.
Moreover, crypto markets are increasingly bifurcated. Look at memes, for instance, they were the first to rise but also the first to decline. Rotation within the crypto space is epic. We expect more of the same going forward.
This is how we are guiding our premium members on ‘what’s next for crypto markets‘ (source: latest premium alert shared on Dec 15th):
We believe that a pullback is a higher probability outcome, and we can track Bitcoin Cash (BCH) + Litecoin (LTC) combined with BTC trends to know for sure. In case BCH + LTC move above their 50% Fib levels, respectively $580 and $130, we will know for sure that bullish momentum will be returning.
We wrote this several days ago, well before the drop. BCH + LTC are well their 50% Fib levels now; they started falling below their 50% Fib and key trendlines since December 17th.
By the way, why are we focused on BCH + LTC? Not because they are an foundational element of our methodology but because Bitcoin is outperforming crypto markets lately which implies that Bitcoin forks, Bitcoin ecosystem tokens and BRC20 tokens need to confirm bullish momentum in crypto markets. They didn’t; consequently, there was no bullish momentum. That’s why we had a defensive stance since Dec 9th.
Whether January will be a strong month or a ‘buy the dip’ month is something we are analyzing right now, based on timeline and cycle analysis.
If anything, Bitcoin seasonality suggests that February is a great month for BTC, so January might be a BUY THE DIP month: Bitcoin Seasonality Charts: Buy The Dip Underway?
Read our recent premium alerts in the restricted research area:
We will guide our premium members towards the next BUY THE DIP opportunity.
