Will the Bitcoin Price Crash Again in 2023?

Table of Contents

Introduction

The cryptocurrency market has been experiencing a significant price correction in recent days, with Bitcoin (BTC) dropping below $100,000 on December 19. This correction marks the largest daily drawdown for BTC in the fourth quarter of the year and is also the steepest decline since August 5.

Bitcoin’s Bearish Reaction to Fed Chair Jerome Powell’s Comments

The price correction can be attributed to the cautious remarks made by Federal Reserve Chairman Jerome Powell during a recent speech. Powell suggested that the Fed will only cut interest rates by 50 basis points in 2025, which is lower than previous expectations of four rate cuts. This news sparked concerns among investors about the potential impact on risk assets like cryptocurrencies.

A New Era for Bitcoin?

However, not everyone shares this pessimistic view. According to Glassnode, a leading on-chain analytics platform, the severity of drawdown periods in bull cycles has decreased as market capitalization has increased since 2012. In fact, the deepest drawdown in the current cycle was only 32%, compared to previous cycles which saw declines of 63% (2021), 36% (2017), 71% (2013), and 49% (2011).

Bitcoin’s Drawdown Periods Over the Years

| Year | Depest Drawdown |
| — | — |
| 2012 | – |
| 2013 | 71% |
| 2017 | 36% |
| 2021 | 63% |
| 2024 | 32% |

Glassnode suggests that this decrease in drawdown severity may be due to the growing demand for Bitcoin from spot ETFs and institutional investors. This shift towards institutional involvement has led to a more stable market, with less volatility.

Fundamental Analysis: Support Levels and Resistance

Rafael Schultze-Kraft, founder of Glassnode, identified the price range between $99,000 and $97,000 as the strongest support zone for Bitcoin. This region is based on the cost-basis distribution, which helps investors understand where the total supply was acquired and distributed across different price points.

Support Levels Based on Holders’ Cohort

| Price | Holding Period |
| — | — |
| $97,900 | 1 week to 1 month |

Axel Adler Jr., a Bitcoin researcher, also pointed out a similar support level at $97.9K, held by coins acquired within one week to one month.

Technical Analysis: A Fair Value Gap and Potential Retest of the 50-Day EMA

A fair value gap (FVG) was identified in the price bracket between $97,500 and $95,500. This region also coincides with the potential retest of the 50-day Exponential Moving Average (EMA) level for the first time since October 12.

Key Support Levels

$95,000: Base-level support for trend continuation
$90,000: Key liquidity zones established

However, if a daily candle closes below $95,000, the possibility of Bitcoin dropping to $90,000 increases significantly. Traders will be closely watching BTC’s reaction between $100,000 and $95,000.

Conclusion

The current price correction is a natural part of the bull cycle, and investors should not be overly concerned about steeper declines. With growing institutional involvement and a more stable market, Bitcoin’s fundamentals remain strong. However, it’s essential to keep an eye on technical indicators and potential support levels to make informed investment decisions.

Disclaimer

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin Trader Sees ‘Larger’ BTC Price Dip Next Month as $100K Holds
Exploring the Potential of Bitcoin’s New Support Zone

Subscribe to Our Newsletter

Stay up-to-date with the latest market analysis, trends, and insights. Subscribe to our Markets Outlook newsletter for critical information on investment opportunities, risk mitigation strategies, and trading techniques.

By subscribing, you agree to our Terms of Service and Privacy Policy.

Get the latest updates from our team by following us on social media: