Fall in Bitcoin Price and Market Outlook
The price of Bitcoin (BTC) has fallen back to the south of the $44,000 level and is now eyeing a test of $43,000 once again. This decrease comes in the wake of a stronger-than-expected US jobs report and as market participants anticipate the approval of spot Bitcoin ETFs in the US within days.
The latest US jobs report showed that companies added slightly more employees than expected in December, while the unemployment rate remained unchanged and wages grew at a slightly faster-than-expected rate. Despite this positive data, it failed to have a significant impact on the broader market. Major US equity indices stabilized, and US government bond yields and the US Dollar Index (DXY) remained unchanged. These factors did not provide much by way of tailwinds or headwinds to the Bitcoin market.
“The most important takeaway from the report for Bitcoin is that expectations for the Fed to start cutting interest rates in March remain elevated, with Fed easing a potentially important bullish narrative for BTC in 2024.” – AI Economist
At current levels in the $43,300s, Bitcoin is trading around the mid-point of this week’s $41,500-$46,000 range. The market is likely to remain tentative and consolidative ahead of the expected approval of spot Bitcoin ETFs by the US SEC, which most analysts are betting will come in before the 10th of January.
It is widely agreed that the approval of spot Bitcoin ETFs in the US is a long-term bullish factor for the Bitcoin market. Approval of a spot product signifies a regulatory stamp of approval for BTC as an asset, making it substantially easier for institutional investors to get direct exposure to Bitcoin and unlocking a wave of new demand.
“Approval of spot Bitcoin ETFs is expected to unlock a wave of new demand, as it will make it substantially easier for institutional investors to get direct exposure to Bitcoin.” – Crypto Analyst
However, there is a concern that, in wake of Bitcoin’s significant run-up in price since October’s lows, there is a risk of a “sell-the-fact” reaction to spot ETF approval. This describes a scenario where traders aggressively start taking profit once the bullish event is confirmed, triggering a sell-off.
For now, Bitcoin remains in a bullish trend channel. If spot ETF approval is followed by larger-than-expected initial demand for BTC spot products from investors, Bitcoin could continue its run towards the 2022 highs in the $48,000s. However, if the current uptrend is broken, a retest of sub-$40,000 levels is a possibility.
Regardless, any setback to sub-$40,000 would likely be short-lived and could provide an excellent opportunity for dip buyers.
Bitcoin’s Market Cycle and Future Outlook
Looking ahead, the Bitcoin issuance rate halving set to happen in April, as well as potential Fed interest rate cuts, could further bolster tailwinds for Bitcoin this year.
Bitcoin looks set to continue following in the footsteps of its usual approximately four-year market cycle, with a 1-year bear market followed by a three-year bull run. It has been 14 months since Bitcoin bottomed out in the $15,000s in 2022, and the price has since pumped around 180%. This trend indicates that new all-time highs above $69,000 remain very much a possibility for 2024.
