Bitcoin is under near-term pressure as macroeconomic shifts and changing sentiment continue to push the bullish momentum.
Despite hitting a record high of over $108,000 in December, Bitcoin has seen a reversal driven by a stronger US dollar, increased volatility and cautious positioning among traders.
That’s according to Joe McCann, founder and CEO of crypto investment firm Asymmetric, who has adopted a more bearish outlook for the near term while maintaining a bullish long-term stance.
McCann noted a confluence of market signals, including a hawkish Federal Reserve press conference on Dec. 18 and a significant move in the Volatility Index (VIX), shifted short-term probabilities in favor of a downward correction.
The US dollar, as measured by the Dollar Index (DXY), has been a focal point among leading analysts, including chief crypto analyst Real Vision. Jamie Coutts.
On the same day the Federal Reserve cut rates by 25 basis points, the DXY unexpectedly rose and broke multi-year resistance levels.
“Conceptually it doesn’t make sense,” McCann he tweeted Tuesday, referring to traditional expectations of a weaker dollar as interest rates are cut.
However, the dollar’s strength reflects underlying market dynamics that include global liquidity constraints and investor demand for safe-haven assets.
Still, market participants are not entirely bearish.
McCann emphasized that it has a high cash position, which allows flexibility to capture value during downside moves.
“There are moments in bull markets where weighted outcome probabilities support a move down, even for several weeks, which can present opportunities for alpha generation,” he said.
In other words, short-term dips can be a chance for smart investors to make extra money by buying during the dip and selling when prices rise again.
However, these situations often end up putting investors on the wrong side of a trade and are incredibly difficult to predict.
Looking ahead, analysts suggest that bitcoin’s path will remain tied to broader macroeconomic conditions, including Federal Reserve policy and the performance of the US dollar.
“Waves of favorable regulatory narratives continue to support the spot market,” Singapore-based cryptocurrency trading firm QCP Capital wrote in a note to investors on Monday. “However, it will not be smooth sailing until January as structural risks loom.
The US Treasury is expected to reach its debt limit in the middle of the month, forcing it to use special measures to keep paying government bills, for example.
“This could trigger market volatility as discussions on the issue intensify,” QCP wrote.
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