Bitcoin is under short-term pressure due to macroeconomic changes and volatile sentiment.
Despite reaching a record high of over $108,000 in December, Bitcoin has seen a reversal led by a stronger US dollar, high volatility and cautious positioning among traders.
According to Joe McCann, founder and CEO of the crypto investment firm, he has taken a more aggressive view in the recent past and is maintaining a long-term stance.
McCann cited the hawkish Federal Reserve press release on December 18 and a confluence of market signals, including a significant move in the Volatility Index (VIX), turning the short-term opportunities into a downward correction.
The US Dollar, measured by the Dollar Index (DXY), has been a point of focus among leading analysts, including Real Vision's chief crypto analyst. Jamie Coutts.
The same day the Federal Reserve cut rates by 25 basis points, the DXY rose unexpectedly, breaking multi-year resistance levels.
“In theory, this makes no sense,” McCann said He tweeted. Tuesday, citing the traditional expectation that the dollar will weaken as interest rates are cut.
The dollar's strength, however, reflects market volatility that includes global liquidity constraints and investor demand for safe-haven assets.
Still, market participants are not completely brave.
McCann highlighted that it maintains a heavy cash position, which allows flexibility to hold price during downward moves.
“There are times in bull markets where weighted scoring opportunities favor a move to the downside, even for a few weeks, which can provide opportunities to generate alpha,” he said.
In other words, short-term dips can be an opportunity for smart investors to make more money by buying during dips and selling when prices rise.
Still, these conditions often catch investors off guard and are incredibly difficult to predict.
Looking ahead, analysts suggest that Bitcoin's path is tied to broader macroeconomic factors, including Federal Reserve policy and the performance of the US dollar.
“The waves of favorable regulatory narratives continue to support the spot market,” Singapore crypto trading outfit QCP Capital wrote in a note to investors on Monday. “But it won't be smooth sailing until January as structural concerns loom.”
The US Treasury is expected to hit the debt ceiling in the middle of the month, forcing it to use special measures to continue paying the government's bills.
“This could create market volatility as discussions around the issue intensify,” QCP wrote.
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