Bitcoin Forecast: BTC/USD -30% From Highs – When Will the Selling Stop?

Bitcoin Key Points

• Bitcoin is in the midst of a -30% correction off the intraday high, with little in the way of direct news driving the cryptocurrency lower.
• Bitcoin ETFs have seen substantial outflows on all but four days this month, with total outflows nearing -$3B so far
• The next downside levels to watch are near $85,600 (the 78.6% retracement of the Q2-3 rally), and the 1-year low near $74,000.

Among the retail crowd, Bitcoin had its big moment back around Thanksgiving 2017, when the proverbial tech-savvy millennials pitched/annoyed their older family members by regaling them with the benefits of digital currencies as the cryptocurrency crossed $10K for the first time. Bitcoin is now trading about 9X higher than it was eight years ago, but this Thanksgiving, digital asset evangelists will be a bit quieter.

Bitcoin is in the midst of a -30% correction off the intraday high, with little in the way of direct news driving the cryptocurrency lower. In a classic “be careful what you wish for” scenario, the introduction of Bitcoin ETFs has opened the door for large institutional flows that drove Bitcoin sharply higher over the past two years…but when investors get skittish, the corresponding outflows can weigh heavily on price. As the table below shows, Bitcoin ETFs have seen substantial outflows on all but four days this month, with total outflows nearing -$3B so far:

Source: Farside Investors

Fundamentally speaking, the outflows have been driven in part by fading expectations of a December rate cut from the Federal Reserve (and the corresponding strength in the US dollar), but with rate cuts odds edging higher after the mixed NFP report today, that clearly doesn’t tell the whole story. Ultimately, the sentiment tide has turned on Bitcoin, and unless/until we start see improving price action and fundamental factors, traders will remain in “sell rallies” mode as a default.

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

As the chart above shows, Bitcoin is in the midst of a brutal downdraft. Since peeking out to a record high above $126K in early October, the cryptocurrency has fallen a full -30% to trade below $89K as we go to press. If anything, the selloff has accelerated in the last couple of weeks, with -17% of that drop occurring in the last nine days alone.

The 14-day RSI indicator in the subpanel shows that Bitcoin is currently “oversold,” though that’s not necessarily a sign that we’ll see a bounce any time soon, especially with no technical support until the 78.6% Fibonacci retracement below $86K. If that level gives way, the next level to watch will be the 1-year lows near $74K. At this point, traders will continue to sell near-term bounces in the cryptocurrency until it can break out of its bearish channel, and even then, it would likely need to carve out a “higher low” before dip buyers get more constructive.

-- Written by Matt Weller, Global Head of Research

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