BITCOIN, CRYPTO KEY POINTS:
- Bitcoin Remains above the 40,000 level, which remains key for further downside.
- Recent research shows the resilience of the crypto industry and shows that 83% of crypto mentions are positive.
- Over $300 million in long positions were liquidated following today's plunge Prices.
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Bitcoin (BTC/USD) fell as much as 7.5% overnight to hit a low of around $40,520, just a touch away from the psychological $40,000 mark. I talked about the possibility of this possible decline in my article last week (click here to read). There doesn't seem to be a single driving force behind this move, except perhaps the slightly stronger US dollar. However, I think this is partly due to profit-taking ahead of this week's risk events and the year-end holidays.
Source: TradingView
WILL SUPPORT AT THE $40,000 LEVEL HOLD?
The $40,000 mark could be the key to the holidays. A break below this level could open the potential for a deeper decline towards the $31,000-$32,000 area. As mentioned above, I believe some of this development is likely due to profit-taking as we have a number of risk events ahead. The move lower could be welcomed by many, especially institutions that may want to gain exposure ahead of spot ETF decisions in early 2024. The question is how deep the decline will be and will the FOMC meeting play a role in that?
According to data from CoinGlass, there was an approximate liquidation of long positions worth around $335 million in the last 12 hours. The number of liquidations is shown below, with Bitcoin at the top, followed by Ether.
Source: CoinGlass/CoinDesk
CRYPTO RESILIENCE
A decline should not be viewed in a negative light as the overall cloud that many thought would hang over the crypto sector has long since cleared. This is something I've discussed before, but it's also been pointed out in research recently. According to a recent study published by Coinwire.com, 83% of Crypto mentions in op publications in 2023 were positive. This would explain the industry's resilience at a time when it has faced a number of challenges.
Other key findings from the CoinWire study revealed that over 65% of global crypto-related tweets have a positive sentiment. The UK is taking the lead in this global celebration as more than 72% of crypto-related tweets from this region are positive. Here too, the USA is leading the way: Approximately two out of three Americans view cryptocurrencies positively in 2023. I have to admit that this surprised me given the FTX scandal, but I was reminded again of the banking crisis at the beginning of the year.
I think the point I'm trying to make here is that a sell-off shouldn't be doom and gloom, and with the holidays ahead, one shouldn't get caught up in the FOMO of it all. The outlook for 2024 looks promising and I would keep that in mind if there is a sharp and aggressive decline.
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CATHY WOOD'S ARK INVEST SELLS COINBASE SHARES
ARK has been steadily selling Coinbase (COIN) shares over the past few weeks. ARK upped the ante in July, selling 480,000 shares worth $50.5 million at the time, until last Friday when ARK sold another 335,860 shares that would have been worth $49.2 million at Coinbase's closing price. This comes as a surprise to me given the positive outlook I have for Coinbase in 2024, but that is a topic for another time.
However, ARK made the sale due to the target weighting it applies to its ETFs. The recent rise in Coinbase stock price has caused the shares' weight to exceed the 10% limit set by ARK. However, this could not be achieved through the sale as COIN currently represents approximately 13% of the Fintech Innovation ETF and +-11% of the Next Generation ETF. A further rise in Coinbase price could cause ARK to see further selling in the coming days and weeks and could be worth watching.
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Bitcoin price outlook and final thoughts
From a technical perspective, the fact that BTCUSD failed to find acceptance above $45,000 was a sign that a retest of the $40,000 level was inevitable. We are just below this level today, but could still reach this level, where the 20-day MA is also just above the $40,000 mark.
Support at $40,000 with a downside break brings support at $37,600 into focus while the 50-day MA rests at $37,400. Any further decline brings the support areas at 35600 and 35000 into play.
An upside move from here will face immediate resistance at $43,000 before the psychological $45,000 level comes back into focus. The main resistance level at $50,000 looks tasty and achievable, but there is a growing chance of a deeper retracement before a test of this level results in success.
Source: Kobeissi letter
Resistance levels:
Support levels:
BTCUSD Daily chart, December 11, 2023.
Source: TradingView, chart created by Zain Vawda
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— Written by Zain Vawda for DailyFX.com
Contact Zain and follow him on Twitter: @zvawda
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