Crypto on thin ice

Market overview

The crypto market is walking on thin ice, stabilising at levels just below $3T (+0.5% in 24 hours). However, this is a dangerous lull following a downward momentum, with the risk of reverting to a sell-off at any moment. All attention is now focused on whether the bulls in the crypto market will be able to defend the late November lows near $2.83T. The strength of the bears is evident in the fact that the market did not even linger at its 200-day average, as it did in the previous downturn at the end of 2021.

As in 2017, the influx of TradFi finance players did not help growth, contrary to expectations. Observers are now repeating the same mistake in assessing the impact of ETFs. In the long term, traditional finance is beneficial for cryptocurrencies when participants' views on the outlook become out of sync. This process has only just begun.

Bitcoin experienced another liquidation of longs at the start of the US session on Monday. At its lowest point, the price fell below $84K, but on Tuesday morning it recovered to the levels of the previous day, trading at $87K. Having become a sensitive indicator of global financial market sentiment in recent months, Bitcoin has turned into their fear in the last few days. Its sharp decline on Monday intensified the sell-off in stocks and spurred demand for safety, although the impact was not too strong. Although the decline has paused, the main scenario remains a move to the $60-64K area, where 161.8% of November's downward momentum and the 200-week moving average are concentrated.

Bitcoin started the new month with a sharp decline, falling below $84,000 at one point and losing about 8%. December began with a flight from risk, FalconX notes, and expects structural problems in the crypto market to continue this month after BTC's decline in November.

BTC Markets calls what is happening a ‘classic deleveraging spiral.’ The panic was exacerbated by the $9 million hack of DeFi aggregator Yearn Finance. Investors also fear possible Bitcoin sales by Strategy.

On Monday, Strategy announced the creation of a $1.44 billion reserve for payments on preferred shares and other company obligations. The amount covers payments for 21 months ahead. Separately, CEO Fong Le said the company may start selling Bitcoin to pay dividends if its mNAV (the ratio of the company's share price to its Bitcoin reserves) falls below 1, but added that this would be a last resort.

Bloomberg Intelligence strategist Mike McGlone confirmed his target forecast for BTC at $50,000, noting that the current pressure on Bitcoin could lead to a deeper correction.

Ethereum is undervalued by 10 out of 12 widely used models, said CryptoQuant CEO Ki Young Ju. In his opinion, the aggregate ‘fair value’ of ETH is around $4,836.

In November, the total spot trading volume on centralised exchanges (CEX) decreased by 26.7% compared to October, amounting to $1.59 trillion. This is the lowest figure since June.

The FxPro Analyst Team