Bitcoin Faces Possible Correction as ETF Decision Approaches


Bitcoin Faces Possible Correction as ETF Decision Approaches
© Getty Images News/Mark Case

Bitcoin (BTC) is navigating uncertain waters as it circles around $44,000 ahead of the December 21 Wall Street opening. This comes after a recent breakout that saw BTC/USD hit highs of $44,300 before experiencing a reversal.

Despite being up over 6% week-to-date, Bitcoin's performance has led to mixed reactions in the market.

According to Stockmoney Lizards, a trading team, “Although a correction seems necessary, BTC chart continues to look very strong on all timeframes”.

The analysis suggests that Bitcoin is forming an ascending triangle pattern, with a retest of the upper resistance line around $44,000 being imminent. The near-term forecast, buoyed by the anticipation of the United States’ first Bitcoin spot price exchange-traded fund (ETF) decision due by January 10, points to a potential upside target of $48,000.

The ETF Decision: Implications and Expectations

The upcoming ETF decision is a focal point for many market analysts. Stockmoney Lizards speculates that Bitcoin will continue to rise until the ETF decision is announced. However, they caution that even a positive announcement could lead to a "buy the rumor, sell the news" event.

This perspective aligns with other market analyses, including that of trading firm QCP Capital. QCP Capital's market update echoes a similar sentiment, highlighting the likelihood of a 'sell the news' scenario in the second week of January.

The firm anticipates resistance for BTC in the $45-48.5k range, with a possible retracement to $36k levels before a continued uptrend. This scenario suggests that the market's actual demand for the BTC Spot ETF might not meet the high expectations initially set.

Stockmoney Lizards further elaborates on the necessity of a market correction, stating, “The chart looks heated up and a correction would be good”.
They suggest that a drop below $40k could trigger liquidations of leveraged long positions, leading to a retracement towards $38k.

Factors such as the need for a rally correction, year-end sales (tax loss selling), and reduced trading activity due to the holidays are all cited as contributing factors to this potential scenario.

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