Despite the massive and unprecedented gains, the general crypto market has also gone through three major price corrections this year and individual coins have experienced varying degrees of price crashes.
But it is the end of the year that is causing so much concern among investors and traders in the market. Historically, December has always been a risky month for bitcoin, and by virtue of its influence over the market emotion, December is risky for other coins too. This year, December started on a negative note for the crypto market.
On Black Friday, November 26, bitcoin fell by $2,000 within a few minutes, effectively liquidating hundreds of millions. Although it recovered, it fell again on December 4 from above $57,000 to $42,000. Several data tracking forms estimated that the drop liquidated over $1.1 billion across several exchanges. Bitcoin pulled other coins down with itself and within a few hours, the market was all red; the bears had arrived and taken over.
Since then, bitcoin and the other tokens have not fully recovered. As of writing, bitcoin is trading at $49,258.40, a massive $20,000 less than its all-time high price which it hit in November. Other coins show considerable improvement, but the bears are having the upper hand right now. After Bitcoin crashed on Sunday, its fear and greed index fell to a new 5-month low of 16 indicating extreme fear.
Concerns Are Growing
Bitcoin’s price movement has been a major source of concern going into December. The world’s first cryptocurrency holds a firm influence over the market, and it is only right that bullish investors monitor its price. The general market sentiment has grown weaker and generally, investors are now extremely fearful of the continued bearish movement of the market.
Historically, December is seen as a month of indecision and uncertainty. This is one of the reasons why the massive bitcoin sell-off took place on December 4. Investors became concerned about the volatility of bitcoin going into December. Other reasons are concerns about the impact of regulations and the discovery of the new coronavirus variant, omicron. The latter factor was the main reason behind the November 26 market crash.
But the market is holding. This crash is the biggest since the global market meltdown that occurred in May. That crash pushed bitcoin to $29,800 in July. Since the coin picked up in August and caused a general market rally, the market has not crashed to below $40,000 where it has a support zone established since September.
Yet, the uncertainty about bitcoin and other coins continues to put pressure on investors who are unsure about a market rally in January. Historically, each December meltdown is usually followed by a respectable increase in price by January. Will next year be different? Investors are concerned and for good reasons too.
Regulatory Fears May Favor The Bears
According to Bloomberg, crypto investors now use the fear and greed sentiment as a talisman. They couldn’t be closer to the truth. Investors have continued to talk about ‘buying the dip’ -a term that describes strategically buying more tokens as the price crashes. Notably, El Salvador, the Latin American country that adopted bitcoin in September, bought 150 Bitcoin shortly after the crash on Sunday.
Despite the optimism, it might be the bears who gain firm control of the market in the coming weeks. And the major reason for that won’t be the potential effects of omicron, but the concerns about crypto regulations in the new year.
Regulators around the world are reportedly working on creating regulations for the crypto industry and analysts expect them to be announced early in the new year. Historically, announcements of regulations have always caused a dip in crypto and next year might be no different.
If this plays out, investors will continue to go short on crypto, sustaining the bearish momentum that has held for nearly a month now. Looking at the BTC-USD chart on TradingView, Bitcoin would need a strong bullish candle on the daily chart to carry it into a bullish trend. For now, bears continue to hold sway over the market.