Bitcoin (BTC) starts its first full week of December at three-week highs as the bulls and the bears battle on.
After a weekly close just above $17,000, BTC/USD seems determined to make the most of relief on stocks and a weakening United States dollar.
As the United States gears up to release November inflation data, the USD looks to be a key item to watch as BTC price action teases a recovery from the pits of the FTX meltdown.
All may not be as straightforward as it seems — miners are facing serious hardship, and data shows and opinions on stocks’ own ability to continue higher are far from unanimous.
As the end of the year approaches, will Bitcoin see a “Santa rally” or face a new year nursing fresh losses?
Cointelegraph presents five areas worth watching in the coming days when it comes to BTC/USD performance.
Bitcoin traders diverge over “Santa rally”
Light relief for Bitcoin bulls this week comes in the form of a solid weekly close followed by an uptick to multi-week highs.
BTC/USD hit $17,418 on Bitstamp in the hours after the close, taking the pair to its highest levels since Nov. 11, data from Cointelegraph Markets Pro and TradingView shows.
For traders, there is reason to believe that short-term strength may hold, allowing Bitcoin to head closer to $20,000.
“No change to my expectations. Still looking for 19k+,” Credible Crypto confirmed to Twitter followers on Dec. 4:
“$BTC has formed a nice tight consolidation here after a clean impulse on low time frame. May dip into 16k’s first to take out these built up lows but still expecting continuation up after regardless.”
Fellow trader Dave the Wave, meanwhile, put faith in a Christmas rally coming next, while others, including popular commentator Moustache, said that the time was historically right for recovery.
Comparing the 2022 bear market to previous ones, he explained that BTC/USD should now be finding a bottom, 31 weeks after its last all-time high.
“The Bitcoin bottom should be very close,” he reiterated over the weekend.
Not everyone, however, is so optimistic. For Crypto Kingpin, there is room for a move to $18,000 before Bitcoin starts “heading lower.”
While not mentioning exact downside targets, he described the weekly close as “conflicting.”
“im still of the belief for now that this move up on btc is part of a corrective abc w4 before making a new low sub $15k into Q1 2023 where we find a longer term bottom,” another popular trader, Bluntz, tweeted after the weekly close.
Similarly conservative on lower timeframes is trader Korinek_Trades, who despite calling for a “huge relief bounce” on Bitcoin acknowledged that downside could take it as low as $12,000.
Crypto voices cautious on stocks amid “imminent” crash claim
The coming week in macro marks the precursor to the all-important U.S. Consumer Price Index (CPI) print for November, due Dec. 13.
In the meantime, U.S. Producer Price Index (PPI) and jobless data later in the week will be dates to watch for traders, these traditionally sparking at least short-term volatility.
Eyeing U.S. equities, meanwhile, the tone among crypto traders and beyond appears tense, despite recent strength in the face of a declining dollar.
The S&P 500 (SPX) finished the week prior up 1.66% at 4,071 points.
“Unless we take out 4,300 on volume and stay above, this to me is a propped-up rally. Could take a few weeks to climb mind,” Crypto Tony warned over the weekend.
An additional tweet revealed doubts about Bitcoin avoiding knock-on effects despite already significantly underperforming stocks in the wake of FTX.
“This is a very plausible scenario,” Crypto Tony commented alongside a chart:
“If we do indeed see a continuation crash in the stock market due to high interest, defaults etc, I expect Bitcoin to follow. Until then we will simply range in my opinion while there are minimal buyers.”
That sentiment echoed a forecast from popular commentator Nunya Bizniz, who earlier suggested that the SPX may put in a “Santa rally” before reversing.
The starkest outlook on equities came from Michael A. Gayed, the renowned portfolio manager and author of investment strategy circular, “The Lead-Lag Report.”
In an extensive Twitter digest on Dec. 3, Gayed went beyond caution, telling readers that an “imminent stock market crash” was next.
“My point is that there are lags and that markets have a funny way of surprising the crowd out of nowhere,” part of one post read:
“It is not impossible to see a scenario where the butterfly creates the hurricane.”
He added that FTX had itself created unusual market responses even beyond crypto.
Miners already in “giant capitulation”
The FTX saga is beginning to show itself in the struggles of Bitcoin miners to an increasing extent.
The latest data shows that the 30-day change in the BTC supply held in miner wallets is at its most negative since the start of 2021.
The numbers from on-chain analytics firm Glassnode come in the form of the Miner Net Position Change metric. As of Dec. 3, miners were overall down 17,721 BTC over 30 days.
Additional data confirmed miners’ overall BTC balance putting in a further steep decline at the start of December, dropping from 1,828,630 BTC on Nov. 30 to 1,818,303 BTC on Dec. 3.
The last time that miners’ balances were that low was in September 2021.
As BTC/USD fell 16% over the course of November, miners suddenly encountered already slim margins squeezed beyond the point of no return.
This means “capitulation” as they unplug, commentators argue, and a period of flux is now entering.
“November was a horrible time for BTC miners,” popular analyst Satoshi Stacker summarized:
“Bitcoin miners had gone bankrupt in previous cycles before things got better. We’re in the middle of a giant Bitcoin mining capitulation now.”
An accompanying list of grim financial results from public miners underscored the theory.
As Cointelegraph reported, Bitcoin’s Hash Ribbons metric is already flagging a capitulation phase in the making, its two moving averages crossing over just months after miners exited their last capitulation.
Difficulty set for biggest drop in 17 months
With Bitcoin miners under stress, network fundamentals are beginning to reflect changes in activity.
At its next automated readjustment on Dec. 6, mining difficulty will drop by an estimated 7.8%, according to data from BTC.com.
The weeks following the FTX meltdown have produced curious changes in network participation, and analysts have suggested various reasons why fundamentals have diverged from price action.
As Cointelegraph reported, one theory even argued that Russia was cornering the market by adding significant hashing power despite miners en masse seeing significantly reduced profitability.
While the hash rate was still increasing after FTX and the subsequent BTC price decline, toward the end of November, things began to change. Hash rate fell from near all-time highs and difficulty with it.
The forthcoming decrease in difficulty will even constitute Bitcoin’s largest since July 2021, when a single readjustment saw it drop by over 27%.
Meanwhile, for Timothy Peterson, investment manager at Cane Island Alternative Advisors, there is even reason to believe that difficulty may preclude a macro BTC price bottom.
In a tweet on Nov. 29, he argued that when the 200-day moving average of BTC/USD and its “difficulty value” — a difficulty-derived BTC price value — converge, it has historically meant a bottoming formation.
“A bitcoin buy signal is within sight. Caveat: based on historical relationships which may no longer hold,” he commented:
“Still, I think difficulty is a good indicator of a minimum level of demand for bitcoin. The convergence is at 12k, which means price must be +/- 12k for 200 days.”
Such a formation, accompanying charts showed, may not enter until the middle of 2023.
Sentiment avoids “extreme fear”
As Bitcoin price action staves off further macro lows, sentiment is also shunning volatility.
Related: How much is Bitcoin worth today?
Ever-popular sentiment gauge, the Crypto Fear & Greed Index, remains tied to an area just above its “extreme fear” zone.
Having dropped in line with price following FTX, a modest recovery has been underway, despite the overall impression that new lows are due.
The curious divergence to many commentators’ prognoses is heightened by the state of affairs “on the ground” for investors themselves.
As Cointelegraph reported, realized and unrealized losses for the BTC supply are hitting levels never seen before. As a whole, the supply is in net loss, as per the market value to realized value (MVRV) metric.
MVRV compares Bitcoin’s market cap to its realized cap — the aggregate price at which the supply last moved. When the latter crosses under the former, it has signaled price bottoming structures.
Describing those structures as an “accumulation zone,” meanwhile, popular commentator CryptoNoob said that current conditions could even constitute a “lifetime investment opportunity” for Bitcoin.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.