Key Points
- Bitcoin’s biggest threat currently is a decline in institutional support amidst increasing volatility.
- If the current trend persists, $90K could potentially act as the local support level.
Bitcoin’s [BTC] recent price movements have shown resilience, despite entering the last month of the year without reaching the $100K mark. The market remains bullish, with strong demand countering selling pressure, indicating optimism.
There has been a noticeable absence of a significant pullback, despite many investors exiting the cycle after securing substantial profits. This absence highlights a strong sense of FOMO (Fear Of Missing Out) among investors.
Threat of Institutional Support Decline
Bitcoin’s [BTC] future trajectory heavily relies on sustained support from both retail and institutional investors. However, a decline in institutional backing could pose a significant threat to Bitcoin’s value.
For instance, Microstrategy, a company heavily invested in Bitcoin, sees its stock [MSTR] react dramatically to changes in Bitcoin’s value. The volatility of MSTR is four times that of Bitcoin, introducing a calculable risk for its investors.
In light of this, Bitcoin’s appeal as a store of value could potentially weaken, leading to institutional sell-offs and liquidations. This could result in a broader market correction, especially if selling pressure continues unchecked.
Volatility and Bitcoin’s Future
At 63, the crypto volatility index indicates noticeable, but not extreme, market volatility. However, if the volatility index rebounds strongly, it could rise towards the previous rejection point of around 70, indicating higher expected price fluctuations and greater market uncertainty.
Historically, a peak in the volatility index has coincided with Bitcoin reaching a bottom. This suggests that Bitcoin could hit a local bottom, leading to a healthy retracement, lower volatility, increased institutional FOMO, and a potential breakout from inconsistent price action.
A recent report identified $90K as a key support level, marking a significant bottom formation. If volatility enters the ‘high’ zone, where significant price swings can occur in a short time, the likelihood of a pullback remains high.
In such a scenario, $90K could serve as a strong liquidity pool, attracting both swing traders and institutional activity, leading to a potential uptick in price.
With the upcoming Fed meeting, traders are increasing their bets on a 25-basis point rate cut in December. This macroeconomic move is likely to trigger sudden swings in the derivative market, potentially leading to a sharp uptick in price and increased market volatility.
