Bitcoin faces a weaker recovery than 2023 – What that means for BTC’s next leg

Bitcoin’s [BTC] recovery is losing momentum as its volatility has decreased to approximately 25%, approaching the 18% low seen in July 2023. Lower volatility typically signals less fluctuation in price due to the equilibrium of buying and selling forces within the market.

During 2023, after falling from a bear-market low in April 2023, Bitcoin [BTC] experienced a brief period of recovery before experiencing decreasing volatility. Subsequently, speculative interest began to flow from the crypto asset to other cryptocurrencies.

Following the rally, however, the upward movement stalled; thus far, BTC has increased by only 38% over its June lows. In contrast, it had been up 75% at this point during the same time frame of 2023. The present gap represents substantially weaker momentum relative to the prior cycle.

If volatility remains compressed, a sharp move could follow, but sustained upside will require stronger demand to drive prices higher.

Bitcoin holders’ profits shrink to 5.5%

Although the current cycle of price increases has begun to slow, the decrease in upward momentum among short-term holders has resulted in a decline in their unrealized profits. On an average basis, these profits declined from approximately 20% to 5.5% over the course of one month.

This implies that some early buyers had either realized some of their profits or seen their unrealized gains diminish as prices fell.

Shorter profit margins among holders make them more vulnerable to additional downward price movements that might lead to increased selling pressure. However, currently the average cost basis at $76,500 is greater than the present price, so most recent purchases remain profitable.

Therefore, this amount could serve as a level of support should holders wish to maintain profitability and defend their position against potential losses.

Bitcoin holds $80K as Fed decision limits recovery

Matt Mena, senior crypto research strategist at 21Shares, stated that hawkish tones continued to exist as inflation remained elevated. Prior to the announcement, Bitcoin traded down to $80,500.

He said,

Technically, $80K remains the key support to defend, with a break lower exposing $77K–$78K and potentially $75.8K. On the upside, reclaiming $81K–$82K, where the 50-day moving average and ETF cost basis converge, would open the door to $84K–$85K, followed by $87K–$87.5K.

However, after the announcement, it traded up towards $81,000 and is currently trading at $80,900. Therefore, $80,000 represents critical support for Bitcoin. Mena predicted,

Softer inflation, easing yields, and a December rate pause could push Bitcoin toward $90K and beyond, with $94K–$95K emerging as the next key target, where the mean MVRV price marks a historically significant onchain valuation level.

A break lower could provide a technical area where a possible breakdown may occur at $77,000-$78,000, followed by $75,800. While the MACD indicator shows a slight bullish crossover, overall momentum is still below zero.

Therefore, breaking above the current resistance zone near $81,000-$82,000 could create a pathway towards $84,000-$85,000. However, softer inflation and decreasing yield environments may ultimately lead to a move towards $90,000.

Final Summary

• Bitcoin volatility has fallen to 25%, while short-term holders’ average unrealized profits have dropped to 5.5% from 20%.

• BTC faces $80,000 support as a hawkish Fed stance limits recovery, with further downside possible if buyers fail to defend this level.