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An end-of-the-year crypto market rally may not happen as Bitcoin and altcoins remain in a deep sell-off. This article explores some of the top reasons why a Bitcoin and altcoin rally may remain elusive in the foreseeable future.
Crypto Market Rally Looks Elusive as Bitcoin Formed a Bearish Chart Pattern
One main reason why the crypto market rally may not occur during the last days of the year is that Bitcoin remains significantly lower than its all-time high. BTC has formed several risky patterns that may lead to further downside.
The daily timeframe chart shows that Bitcoin price has crashed from its all-time high of $126,200 in October to the current $89,800 level. It has traded below all moving averages. It shows that the downward trend continues. BTC price is also below the Supertrend and the Ichimoku cloud indicators.
Bitcoin price has also formed a bearish flag chart pattern, which is made up of a vertical line and a rising channel.
The Relative Strength Index (RSI) has remained below the neutral point at 50. Therefore, the most likely Bitcoin price forecast is highly bearish, with the initial target being the November low of $80,637, which is about 10% below the current level.
Worse, a drop below the November low will point to further downside. It could lead the price to the April low of below $75,000.
A significant Bitcoin drop will likely lead to a broader crypto market crash. Historically, the crypto market falls when Bitcoin is in a downward trend and vice versa.
Bank of Japan Interest Rate Hike
The other main risk that may prevent a crypto market rally is that the Bank of Japan (BoJ) will meet later this week and deliver its monetary policy decision.
Data compiled by Polymarket shows that investors anticipate that the bank will hike interest rates by 0.25% for the first time in 11 months.
Odds of this hike have jumped to 98%, which explains why the Nikkei 225 Index has pulled back. Japanese bond yields have also jumped to a multi-year high.
History shows that Bitcoin and other cryptocurrencies tend to drop after the BoJ hikes rates, especially when the Federal Reserve is cutting.
Liquidity in the Cryptocurrency Market Has Eased
The other main reason why the crypto market rally may remain elusive is that liquidity has plunged over the past few weeks. It has dropped sharply after the October 10 liquidation event, when over 1.6 million trading accounts were liquidated. That resulted in a $20 billion wipeout in a single day.
Data compiled by CoinGlass shows that futures open interest has dropped from the year-to-date high of over $226 billion in October to the current $133 billion. This figure has dropped as investors have continued to reduce the amount of leverage in their trading.
More data shows that the weighted funding rate has remained flat over the past few months. That confirmed the view that liquidity has dropped.
Jitters in the Artificial Intelligence Industry Remain
The other main risk facing the crypto market is that the artificial intelligence industry has shown signs of slowing down. It could affect risky assets.
Top stocks, like Nvidia, Oracle, Broadcom, CoreWeave, and IREN, have all dropped and moved into either a correction or a bear market. That has led to a wipeout of worth over $1.3 trillion.
Top AI stocks, including Oracle and Broadcom, declined last week after they released their financial results. This explains why the Nasdaq 100 and S&P 500 Indices have struggled to retest their all-time highs.
Continued sell-off in the technology sector may lead to more downside in the crypto market. It could lead to a risk-off sentiment, which can affect Bitcoin and other cryptocurrencies. In addition, the Federal Reserve hinted that it may cut interest rates just once next year, which is lower than what analysts were expecting.
