Bitcoin price analysis: A year-end rally is likely
Aggressive rate rises by the US Federal Reserve and a string of bankruptcies in the crypto space resulted in one of the worst crypto winters in 2022. Bitcoin (BTC) has dropped close to a 63% year-to-date fall, but analysts remain divided on whether a major low has been made or not. Buyers are trying to push bitcoin above $17,000 as of 22 December 2022.
Fairlead Strategies’' Katie Stockton believes that bitcoin is still months away from forming a major low. In a recent note, Stockton said that technicals suggest a drop to $13,900 for bitcoin by the middle of the next year. In the short term, she expects a retest of “the November lows, near $15,600, in the coming weeks.”
To the contrary, Coinbase in its 2023 Crypto Market Outlook said that bitcoin could be closer to a bottom. The report highlighted that nearly 50% of bitcoin holders were underwater on their investments, which is close to the historical average of 53% seen during the November 2011, January 2015, and February 2019 bear market lows.
The sharp fall in bitcoin has attracted strong buying by retail investors. Will Clemente, an analyst at Reflexivity Research, shared a Glassnode chart, which shows that “the percentage of bitcoin supply held by retail has soared to 17% this year.” This suggests increased adoption of bitcoin, which is a positive sign.
The percentage of Bitcoin supply held by retail has soared to 17% this year.— Will Clemente (@WClementeIII) December 20, 2022
Not perfect yet, but solid for a 12-year-old asset and definitely trending in the right direction.
Bitcoin's supply disperses over time, while Fiat's holder base concentrates to whales over time. pic.twitter.com/ipDbWVmcEl
Compared to that, institutional investors seem to have taken a cautious approach toward cryptocurrencies. CoinShares data shows that net inflows into crypto funds slowed to $498m in 2022 versus $9.1bn in 2021.
Could bitcoin go up in the short term and close the year with strength? Read the BTC price analysis to find out.
Bitcoin price technical analysis: Weekly chart
The long wick on BTC’s price last week shows that bears are selling on rallies to the 20-week exponential moving average (EMA). Sellers will try to increase their advantage further by pulling the price below $15,458. If they do that, the BTC/USD pair could start the next leg of the downtrend. The pair could then decline to $13,000 and later to $11,000.
A minor advantage in favour of the bulls is that the relative strength index (RSI) is forming a bullish divergence. This suggests that the selling pressure could be reducing. The first sign of strength will be a break and close above the 20-week EMA.
The pair could then attempt a rally to $25,170, which may again act as a major hurdle. If bulls pierce this resistance, the pair could pick up momentum and rally to $32,283, signalling a potential trend change.
Bitcoin price technical analysis: Daily chart
Bitcoin’s price broke below the 20-day EMA on 16 December, but the bears could not pull the pair to the November low at $15,458. The price rebounded off $16,297 on 19 December and reached the 20-day EMA. This suggests that bulls are trying to form a higher low.
If buyers thrust the price above the moving averages, the pair could jump to $18,319. The bears are likely to defend this level with vigour.
If the price turns down from this level but rebounds off the 20-day EMA, it will indicate a change in sentiment from selling on rallies to buying on dips. That could improve the prospects of a rally above $18,319.
This positive view could invalidate in the near term if the price turns down and breaks below $16,297. The pair could then slip to $16,000 and later challenge the vital support at $15,458. A break below this level could indicate the resumption of the downtrend.
Bitcoin: Buy or sell this week?
The bears are trying to stall the recovery at the 20-day EMA, but the bulls have not given up much ground. This increases the likelihood of a break above the moving averages. Bitcoin’s price analysis suggests that the pair could then climb to $18,319, where the bears may again mount a strong defence.
The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision.