FX.co ★ SEC changes attitude to applications for BTC ETF: Will Bitcoin resume growth?

Over the past one and a half months, we have witnessed a colossal surge in Bitcoin quotes to the level of $44.4k. The upward movement of the cryptocurrency depended on various fundamental factors that shaped the sentiments of retail investors. Expectations of the approval of a spot BTC ETF and another pause in the interest rate hike due to the deflationary movement of the U.S. dollar had a positive effect on short-term opportunities for BTC.

However, the key event of the coming weeks—the Federal Reserve meeting—is over, and there are grounds to believe that Bitcoin is approaching the long-awaited correction. More and more historical factors indicate the "overheating" of the asset and the need for a local decline. Meanwhile, some positive factors maintain investor sentiment in the "greed" section.

Fundamental Factors

One of the most important factors influencing bullish sentiments in the cryptocurrency market is the applications for the launch of BTC ETFs from global funds. Despite the lack of a decision, investors are confident, including thanks to media speculation, that the ETF fund will be approved in the near future. Recently, SEC Chairman Gary Gensler stated that the agency is re-evaluating its approach to applications for the launch of a spot product.

Also, more and more tickers from companies that have applied for the launch of spot BTC ETFs are appearing on American exchanges. At the same time, JPMorgan analysts note that the launch of this product is expected for so long that its acceptance will ultimately lead to an impulsive price drop, as the price of Bitcoin has become "overheated" due to expectations of the launch of BTC ETF.

Investors also received a cold shower from New York Federal Reserve President John Williams, who noted that it is premature to think about a rate cut. At the same time, JPMorgan analysts believe that the U.S. dollar may resume its rise in 2024 against the backdrop of a slowdown in the global economy. The Fed will begin to lower the interest rate in the second half of 2024, and accordingly, consolidation/correction of BTC can be expected in the first half of the year, as the cryptocurrency has a reverse correlation with the U.S. dollar.

BTC/USD Analysis

After an ambiguous previous week, Bitcoin turned to a local decline over the weekend, following a decrease in buying activity. As a result, BTC/USD is on the verge of forming a "double top" pattern. As of December 18, the cryptocurrency is trading at $41.1k, with daily trading volumes around $18.8 billion. Meanwhile, investor sentiment remains near the 70 level.

On the daily chart, the exit from the overbought zone of the stochastic oscillator continues. However, sellers are unable to break through the $40.1k level, which serves as a kind of neckline for the "double top" technical analysis pattern. As long as the $40.1k level holds, it cannot be asserted that the pattern will be activated, representing a trend reversal formation.

MACD also indicates growing dominance of sellers, signaling further price decline. It is also noted that the profits of short-term investors are near their highs, historically signaling a possible price correction. BTC network fees are also approaching their six-month high ($25), signaling overheating. Miners and short-term investors continue to take profits as they see a clear trend of declining profits over the past two weeks.

Conclusion

Bitcoin exceeded all expectations and reached the $44.4k level, updating a local high for over a year. The cryptocurrency formed eight consecutive weekly green candles, only breaking this streak last week. Sales are increasing, positive news is fading, indicating that the battle will move closer to the $40k level, which will determine the depth of the upcoming correction.