After spending almost two months in the consolidation that lasted between mid-August to mid-October, Bitcoin began to rally from a $24,900 low.
In the two months that followed, Bitcoin rallied by more than 70, nearly doubling from $24,900 to about $44,700.
However, Bitcoin is entering a market downturn from here, and investors are getting confused. Why is Bitcoin going down? And seeing that it is, what can we do about it?
In this article, we will be going over five major things you should be aware of about Bitcoin this week, as well as what you can do to make better and more informed decisions.
Let's take the first point:
Bitcoin's bullishness was overextended. Trader and founder of Reflexivity Research, Will Clemente agrees with this.
In a recent tweet posted by the analyst, Bitcoin's two months of unhindered bullishness was enough cause for suspicion.
Clemente says that a correction after such bullishness is "not that surprising".
The analyst went further to mention that corrections like these happen to "shake off weak hands" so that stronger-handed investors can buy and HODL.
Bitcoins volatility is a feature, not a bug, the Clemente says.
This tweet came as a reply to a previous one, where the analyst warned that "there will be sharp corrections along the way".
Clemente notes that investors cannot go wrong by HODLing and waiting for better days.
This tweet from CryptoQuant answers any questions investors may have, about whether this correction is a valid one.
It turns out that it is.
According to CryptoQuant, the crypto market's "Mara Pool's Distribution" is at a high.
This means that investors may have seen the $44,700 high as a Bitcoin peak, and are now making "smart moves".
CryptoQuant describes this as "strategic caution", where investors start to distribute their holdings, as a way to reduce risk.
CryptoQuant also notes that about 50% of Bitcoin's circulating supply is in profit, meaning that investors will more than likely choose to sell and pocket gains from here.
This week started on a bearish note. On Sunday this week, traders lost nearly 400 million to liquidations, as shown below.
Bitcoin's volatility over the last two months has been on the high side, causing huge spikes in liquidations on either side.
This is clearly illustrated in the liquidation chart above, where since mid-October, the amount of daily liquidations has been spiking more frequently.
It always helps to know the key dates on which to expect volatility.
According to a recent tweet from the Kobeissi Letter on Sunday this week, here are some of the key dates to keep notes of.
Starting from Tuesday, the CPI inflation data for November will be released on 12 December.
Right after that, the PPI inflation data and the FED rate Decision on interest rates are expected to hit on Wednesday, 13 December. This means that Tuesday and Wednesday are expected to hold some significantly large volatility in wait for Bitcoin.
According to the CME FED Watch tool, the likelihood that the Fed will change the Federal target rate in the upcoming meeting is predicted at about 98.4%.
Right after that, we have the retail sales data and the initial jobless claims coming in on Thursday.
The Kobeissi Letter also reiterates that "Volatility is set to return with a huge week ahead"
This is simple enough. After investors take profits from Bitcoin, their risk appetite almost always shifts to the altcoins.
This leads to short altcoin booms, right after a Bitcoin crash.
According to a recent tweet from analyst RamenPanda on Twitter, "We are now entering the alt season".
According to the altcoin season index from blockchair, we are not in an altcoin season yet.
However, we are also not in a Bitcoin season either. This means that this metric is sitting at the middle ground, and is likely to tend towards either, as the days go by.
Bitcoin's decline from $44,700 may have been devastating for a lot of traders. However, investors should remember that this market downturn is completely normal and that Bitcoin is only gearing up for a stronger rally upwards.
We are bound to see some volatility this week, so it may be best to be prepared.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.