Short-term setback or trend reversal?

Thought of the week

Short-term sell-offs in bullish phases often do not represent a trend reversal, but serve to “calm” the market, flush high leverage positions out of the market and thus ensure a renewed rise with “realistic” conditions. This is one of the reasons why leverage positions must always be hedged and carefully considered!

Digital Asset News

Bitcoin has recorded strong gains in recent weeks. Nevertheless, Hyland sees the first signs that the soaring price – which has risen by a whopping 60% since the beginning of October – could be jeopardised.

He sees the biggest risk factor in Bitcoin’s market share of the total market capitalisation of the crypto markets.

“The market dominance (or market share) is slowly declining again and has already lost all the gains made by the recent upswing,” the expert states. He adds:

“If it closes below 51.81%, then we would have a lower low for the first time in more than a year, an end to the uptrend and a ceiling formation.”

Other crypto experts assume that this return to market dominance is primarily due to strengthening altcoins and that the alternative cryptocurrencies could now herald their own “old season”.

Current gains by leading altcoins such as Cardano and Avalanche, which recently rose by a whopping 22%, show that this may already be in full swing. Altcoin market leader Ethereum

has “only” gained 12 % in the last week, putting it behind ADA and AVAX, which have led the field with gains of over 50 % in the last seven days.

Over the past three years, Bitcoin has gained a new generation of convinced crypto investors who do not want to sell. Accordingly, new data from the influential HODL Waves metric shows that investors who got into Bitcoin at the end of 2020 are still eagerly holding on to their BTC. The cohort of long-term Bitcoin investors – also known as long-term holders (LTHs) – is therefore not yet interested in expiries despite rising prices.

The HODL Waves metric, which divides the amount of BTC in circulation according to when the respective Bitcoin was last moved, shows that one group of investors in particular has grown in size over the past year.

Since the bear market bottomed out at the end of 2022, the group of unmoved BTC has grown noticeably over the last two to three years (light green share, see chart). While this cohort accounted for just 8% last December, its share is now already over 15%.

In other words, investors who bought their BTC between December 2020 and December 2021 have not yet become weak compared to the other investor groups and are still holding.

This leads to a shortage on the market and illustrates the positive long-term view of most investors.

The negotiators of the European Parliament and the Council reached a provisional agreement on the rules for the use of artificial intelligence (AI) on Friday, 8 December.

The agreement concerns the state use of AI in biometric surveillance, the regulation of AI systems such as ChatGPT and the transparency rules to be observed before market entry. These include technical documents, compliance with European Union copyright law and the sharing of summaries of AI training data.

The EU aims to be the first influential government to legislate on AI and define how it should be used to benefit society and minimise its risks.

“Correct implementation will be crucial – the Parliament will keep a watchful eye to support new business ideas with sandboxes and effective rules for the best performing models.”

Overall, this regulation was received as very positive and thus also strengthens the digital assets industry!

Digital Asset Market

From a chart perspective, Bitcoin is now back at the levels of a week ago, but the sell-offs of the last few hours (as of Monday 9:30 CET) mean that it has a good chance of rallying again, so that the previous highs of the week at ~$44,500 do not seem out of reach. In recent weeks, in anticipation of the Bitcoin ETFs in the US, sell-offs were quickly bought up, resulting in a steady market stabilisation and new upswings.

The next price targets in the event of a positive development: ~$43,000, ~$43,750, ~$44,500

The next price targets in the event of a negative trend: ~$41,500, ~$39,500 ~$38,600

Trading idea

The market currently offers good entry points for the coming week if you can trade quickly and keep the risk low. Altcoins that were sold off disproportionately could see a quick V-shaped recovery. At the same time, calm and distance should be maintained if the trend reversal should set in for the long term until new support zones are established.

Weekly overview

As usual, we are also providing detailed videos for those who want to delve deeper into the subject.


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