Bitcoin Tests Crucial Fibonacci Support as Analysts Caution About Potential Drop to $76K

Bitcoin is currently trading at a critical level that experts believe could dictate whether the cryptocurrency continues its overall upward trend or retreats towards its lows from earlier this year.

Key Takeaways:

Bitcoin is positioned at an important Fibonacci support level, where a decline could result in a fall towards the April lows of around $76,000.
After a weekend leveraging adjustment, BTC dipped below $88,000 but quickly rebounded above $91,500.
Traders are now focused on the upcoming Federal Reserve meeting and significant economic data from the U.S.

In a recent social media update, crypto trader Daan Crypto Trades highlighted that the 0.382 Fibonacci retracement zone is critical for bulls to maintain, suggesting that failure to hold this level might send BTC back to the April lows of approximately $76,000.

“It’s essentially the last major support before the market retests the April lows, which would disrupt the high time frame market structure,” he noted.

Bitcoin Tests Key Fibonacci Support as Analysts Warn of Drop to $76K

Bitcoin Experiences Weekend Dip Below $88K

During the weekend, Bitcoin experienced a short-lived drop below $88,000 amid yet another round of leveraged liquidations, although it subsequently bounced back above $91,500.

Analyst “Bull Theory” described the situation as typical weekend manipulation often seen in low-liquidity conditions, aimed at flushing out both long and short positions.

The focus now shifts to this week’s Federal Open Market Committee meeting, where it is widely anticipated that a 0.25% rate cut will be announced.

Despite this, crypto markets have shown signs of cooling off since the rate cut in October, as Fed Chair Jerome Powell indicated a more cautious, data-driven approach to future adjustments instead of a clear easing trend.

Markus Thielen from 10x Research commented that traders are expecting a similar careful tone from the Fed, which may keep pressure on high-risk assets.

“With ETF inflows decreasing and trading volumes dropping as we head into December, upside participation appears limited,” Thielen pointed out. He added that as volatility decreases, BTC is left more vulnerable to potential downswings in the near future.

“Proponents will highlight the rebuilding of the Treasury General Account, the conclusion of Quantitative Tightening, and upcoming rate cuts as potential liquidity boosts for Bitcoin,” Thielen explained.

However, he cautioned that potential macroeconomic tailwinds are “meaningless if the underlying market message lacks conviction and the structure fails to support any sustained momentum.”

Nick Ruck from LVRG Research suggested that upcoming U.S. employment data and inflation reports could also play a significant role in market direction.

If these reports align with anticipation for a continued easing, Ruck believes there could be renewed liquidity inflows that might help spur a broader recovery across digital assets.

Bitcoin’s Increasing “Liveliness” Metric Indicates Hidden Market Strength

As noted, a crucial on-chain indicator known as “liveliness” is on the rise once again, despite Bitcoin's price remaining relatively stable.

Analysts suggest this divergence indicates an improvement in underlying demand, as dormant coins are moving at unprecedented levels, potentially signaling that long-term holders are re-entering the market.

The consistent increase in this indicator points to a significant capital rotation underneath the surface, even amidst cautious market sentiment.

Liveliness gauges the balance between coins exchanged and those kept, factoring in their age. It typically increases during bull markets as older coins transact at higher prices, showcasing fresh inflows and heightened market confidence.

Last week, Bitfinex reported signs of “seller exhaustion” across the market after a period marked by significant deleveraging and panic-led sell-offs from short-term holders.

“The combination of substantial deleveraging, capitulation among short-term holders, and early hints of seller exhaustion has established conditions conducive for a stabilization phase and resulting relief bounce,” the firm stated.