Bitcoin investors are hoping for a year-end rally, with eyes set on a return above the $100,000 mark. However, investment products tied to Bitcoin are facing declining inflows and weaker institutional demand compared to the start of the year.
With institutional money drying up, it’s becoming clear that despite expectations of interest rate cuts and positive regulatory developments, Bitcoin’s rally might be nearing its end. Let’s examine three key factors that could potentially boost Bitcoin’s price and identify crucial levels to watch in the coming week.
Bitcoin holders are closely monitoring these three factors to anticipate the next surge in BTC’s price:
Bitcoin’s previous bull run was largely fueled by significant institutional capital flowing into U.S. ETFs. Companies like Strategy (formerly MicroStrategy) added Bitcoin to their balance sheets, setting an example for other major corporations. This institutional demand acted as a key catalyst, driving Bitcoin towards $100,000 and its all-time high above $126,000.
Now, as major players exit the market, institutional demand is waning, and Bitcoin is struggling to stay above the key support level of $90,000. The $100,000 level, once a support for Bitcoin, has now become resistance. A decisive break above this level could signal the return of the bull market.
Data shows that nearly $250 million was withdrawn from Bitcoin ETFs in December.
As capital inflows decrease, other metrics that track Bitcoin’s relevance and demand, such as Bitcoin dominance, are also showing a decline.
Bitcoin dominance measures BTC’s relevance compared to other tokens and altcoins in the market. As Bitcoin’s market capitalization decreases, its dominance is also declining. Currently, Bitcoin dominance is below 60%.
A rise in dominance could act as a catalyst for Bitcoin’s recovery. Typically, a decrease in Bitcoin dominance signals the end of a bull run and is followed by a rotation of capital into altcoins and other tokens.
The profit/loss realized on the network can help determine the state of the market. This on-chain metric tracks the net profit or loss realized by traders on a given day. Recently, the metric shows traders realizing losses, indicating capitulation or increased selling pressure on Bitcoin.
Large negative spikes in the metric can signal a change in Bitcoin’s price trend. After consistent profit-taking, traders are now realizing losses, likely anticipating a further drop in BTC’s price.
If a large volume of loss-taking continues, it could negatively impact the price in the coming weeks.
In addition to these three catalysts, macroeconomic developments and expectations of interest rate cuts also influence Bitcoin’s price.
Bitcoin is currently holding above support at $83,828, a crucial level on the price chart. Key resistance levels are $91,361 and $98,019. The $100,000 mark remains another key resistance for Bitcoin.
Bitcoin has been consolidating for over two weeks, and it remains to be seen whether there will be a recovery or a further decline. Two key momentum indicators on the daily BTC/USDT price chart show positive underlying momentum in Bitcoin’s price trend.
The Relative Strength Index (RSI) is at 43, moving towards neutral, and the Moving Average Convergence Divergence (MACD) shows consecutive green histogram bars.
The 20, 50, and 100-day exponential moving averages come into play if Bitcoin sees a daily candle close above the $98,019 mark. A correction could send Bitcoin to test the $83,000 support.
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any person, group, or entity, eliminating the need for third-party involvement during financial transactions.
Altcoins are any cryptocurrencies other than Bitcoin, although some consider Ethereum not to be an altcoin. Litecoin is often considered the first altcoin, forked from the Bitcoin protocol.
Stablecoins are cryptocurrencies designed to maintain a stable price, with their value backed by a reserve of the asset they represent. The value of any stablecoin is linked to a commodity or financial instrument, such as the U.S. Dollar (USD), and its supply is regulated by an algorithm or demand. The main objective of stablecoins is to provide an on-ramp and off-ramp for investors who wish to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value, as cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio between Bitcoin’s market capitalization and the total market capitalization of all cryptocurrencies combined. It provides a clear picture of the interest in Bitcoin among investors. High BTC dominance often occurs before and during a bullish movement, in which investors turn to investing in relatively stable and high market capitalization cryptocurrencies like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in search of higher returns, which often triggers an explosion of altcoin rallies.
