FX.co ★ Bitcoin continues to consolidate with low trading activity: what to expect from the cryptocurrency in the pre-New Year's week?

Contrary to expectations, Bitcoin has barely moved in the past three days. On Friday, the cryptocurrency showed signals for a likely decline and retest of $16,000-$16,400 levels. However, as a result, the asset remained near the $16,800 mark.

As of 08:00, the cryptocurrency continues flat movement with low trading volumes. Positions of bulls and bears remain approximately equal, which indicates a high probability that the flat will continue in the new trading week.

At the same time, don't disregard market psychology and the approaching New Year holidays. It is likely that in the next few days we may see an increase in trading activity associated with Christmas and the impending New Year.

At the same time, the aura of the crypto market continues to consist of negative news. The trial of FTX's collapse is rapidly gaining momentum, and it is already clear that multibillion-dollar amounts of client funds were misused.

A lifeline for the crypto market could be a correlation with stock indices, which show local growth on the eve of the New Year. However, more and more analytical materials and studies of major publications pointing to a challenging 2023 for the stock market are appearing on the web.

Bank of America said a recession could hit the U.S. economy as early as the first quarter of 2023. In addition, the six-month growth rate of the Leading Economic Index (LEI) is at levels that preceded the recession in 2020 and 2008.

The approaching recession is gradually making the stock market the least attractive place to invest. Analysts predict a significant outflow of funds from stock indices, and therefore the growing correlation of Bitcoin and SPX will play against the cryptocurrency.

Analysis of BTC/USD

On the daily chart, the situation remains identical to Friday's: Bitcoin is moving through a flat and trading activity is crossing the local bottom. The overall volatility of the crypto market is also at a low level, indicating a continued phase of consolidation.

As the history of Bitcoin movement shows, the end of the BTC distribution period is characterized by a sharp price move with a surge in volatility. However, under current circumstances, the asset needs a serious news reason for such a move.

In general, the current Bitcoin price movement originates from the retest of the downtrend level near the $16,200 mark. Subsequently, the bulls defended the limit and absorbed the bears' volumes, forming a "bullish engulfing" pattern.

This allowed the bulls to increase their advantage and come close to the level of $16,900 near the Fibo level of 0.236. There is a large cluster here, and therefore the price has been consolidating near this mark for a long time. In case of a successful consolidation above $16,900, Bitcoin will continue to move to the range of $17,000-$17,400.

It is also noteworthy that an inverted "head and shoulders" pattern was formed on the four-hour chart. If the shoulders level is broken, we should expect a local upward spurt to the range of $17,400-$17,800. However, for that Bitcoin also needs to settle above $16,900, which is not possible yet.

The bottom line

The major cryptocurrency in a classic disassembled state enters the new trading week without any signs of growth. Bitcoin is able to realize a local bullish move to the $17,000-$17,400 range, but we should not expect a significant increase in trading volumes, even taking into account the holidays.