Market Overview: Bitcoin
December closed with a bear reversal bar candlestick, marking the end of a pivotal year and opening a fresh chapter in Bitcoin’s journey. In our November analysis, we anticipated Bitcoin gravitating around the $100,000 level, which is currently a critical resistance level.
In our special edition of December’s report, we discussed how large institutional investors significantly impact Bitcoin’s price dynamics. For instance, IBIT, the most traded Bitcoin ETF, recorded a 90% gain in 2024, compelling institutions to adjust their positions. Annual rebalancing requires selling approximately 45% of their holdings, while quarterly rebalancing necessitates 30% reductions following a 47% Q4 rise.
This selling pressure reinforces the technical view that $100,000 is a formidable resistance zone, further corroborated by a measured move on the weekly chart and a wedge top on the daily chart.
Volatility Dynamics
Bitcoin’s relationship with volatility is different from the E-mini or other stocks and indices. In Bitcoin, bull trends tend to thrive under high volatility, contrasting with indices where low-volatility upward trends are often considered healthy. This divergence is critical for traders transitioning from conventional markets to cryptocurrencies.
December witnessed a decline in volatility, a phenomenon that regularly signals caution for Bitcoin bulls. As momentum falters alongside volatility, the risk of a reversals increases.
Bitcoin
The Monthly chart of Bitcoin
December’s candlestick stands as a significant bear reversal bar, closing near the lows with a prominent upper tail above its open. This formation is technically impactful, especially at a critical resistance level like $100,000. The price action in December highlights both the strength of the resistance and the exhaustion of bullish momentum.
After opening below $100,000, Bitcoin rallied above this level before succumbing to intense selling pressure, closing the month well below its highs. Such price behavior often signals profit-taking by large participants.
This bear bar is a compelling stop sell signal, supported by a favorable trader’s equation. The context—a major resistance zone and a strong reversal structure—offers a 2:1 reward-to-risk ratio with approximately 40% probability. If this bearish signal materializes, Bitcoin could revisit the breakout point (BOP) around $75,000, with extended targets near $55,000, derived from measured move calculations.
The $100,000 resistance appears to have formed due to substantial profit-taking by bulls. Their reluctance to rebuy at the same price strengthens the likelihood of a pullback. Many bulls are now likely to wait for more attractive levels, potentially near $80,000 or $75,000, before committing further capital. These levels represent key areas where bullish activity could resume, driven by scaled entries and technical accumulation.
The measured move target of $120,000 is derived from the tight bear channel that dominated 2021–2022. However, with the market appearing to transition into a trading range, the likelihood of extended bull trends decreases.
Looking ahead to 2025, a trading range scenario between $70,000 and $120,000 seems probable. While Bitcoin may momentarily breach $120,000, sustained movement beyond this level appears unlikely due to broader profit-taking and resistance overhead. Conversely, even if prices fall below $70,000, bulls are expected to remain active, scaling in at lower levels, and supporting the broader trend.
The Weekly chart of Bitcoin
On the weekly chart, the IOI pattern (inside-outside-inside) observed last week continues to play a pivotal role in shaping Bitcoin’s price action. This pattern generally offers a 50% probability of success and a 2:1 reward-to-risk ratio, making it an attractive opportunity for traders under the trader’s equation. The inability of Bitcoin to decisively break above $100,000 reinforces the notion of this level as a formidable resistance zone.
The surge to $100,000 can be interpreted as a buy climax, characterized by exhaustive buying pressure. Following this, the price has struggled to gain upward momentum, allowing bears to consolidate their positions. Bears now aim for a retracement to the $50,000–$70,000 range, an area of historical support and prior consolidation. This range represents a magnet for bearish targets, with key levels like $75,000 and $80,000 acting as initial pullback zones.
Bulls, however, remain in the picture, particularly those employing a scaled buying strategy. Buyers are anticipated to accumulate aggressively around $85,000 and below, providing potential upward pressure to stabilize the price.
For now, the bear case appears to be struggling, as evidenced by the failure to break key levels decisively. However, even if the bullish side of the IOI pattern triggers, the likelihood of sustained bullish momentum above $100,000 is slim. Selling at this week’s close, particularly if it aligns with the high of the week, presents a good opportunity for bearish traders.
On the other hand, bulls are better positioned to structure their trades around $75,000 or $80,000, where the risk-reward dynamics favor long positions.
2025 Outlook
While a push toward $120,000 is plausible, sustained gains beyond this level seem unlikely. A bear leg from here towards $50,000 or a trading range between $70,000 and $120,000, is probable: Bears may dominate portions of the year, but their control is likely to be temporary, as bulls remain committed to scaling in during pullbacks.
We thank our readers for their continued support and engagement. Your feedback and comments are invaluable as we collectively deepen our understanding of the markets. Please share your thoughts and insights in the comment section below, and please have no hesitation to forward this report to others who may benefit.
Let’s approach 2025 with discipline, focus, and a shared commitment to growth. Wishing you a prosperous and successful trading year ahead!
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Hi Josep —
As Bitcoin has broken up 100k in 1hr candle with strong bull bar. Should bear consider selling higher?
Dawei
Thank you so much, I bought MSTZ at the last week’s close to short MSTR