Bitcoin faces short-term pressure amid macro and sentiment shifts

Bitcoin is under pressure in the short term as macroeconomic shifts and changing sentiment continue to weigh on its upward momentum.

Despite hitting an all-time high of over $108,000 in December, Bitcoin has seen a turnaround driven by a strengthening US dollar, increased volatility and cautious positioning among traders.

So says Joe McCann, founder and CEO of crypto investment firm Assymetric, who has adopted a more bearish view in the short term while maintaining a bullish stance in the long term.

McCann noted that a confluence of market signals, including an aggressive Federal Reserve press conference on December 18 and a significant move in the Volatility Index (VIX), has shifted short-term odds toward a downside correction.

The US dollar, as measured by the Dollar Index (DXY), has been a focus among leading analysts, including Real Vision’s Chief Crypto Analyst. Jamie Coutts.

On the same day that the Federal Reserve cut rates by 25 basis points, the DXY unexpectedly rose, breaking multi-year resistance levels.

“Conceptually, this doesn’t make sense,” says McCann tweeted Tuesday, citing traditional expectations that the dollar will weaken if interest rates are cut.

However, the dollar’s strength reflects underlying market dynamics, including global liquidity constraints and investor demand for safe-haven assets.

Still, market participants are not entirely bearish.

McCann emphasized that he has a large cash position, which allows flexibility in capturing value during downturns.

“There are times in bull markets when the weighted probabilities of a downtrend favor a move down, even for a few weeks, which can provide alpha-generating opportunities,” he said.

In other words, short-term downturns can be an opportunity for smart investors to make extra money by buying during the downturn and selling when prices rise again.

Yet these situations often leave investors on the wrong side of a trade and are incredibly difficult to predict.

Looking ahead, analysts suggest Bitcoin’s path will remain tied to broader macroeconomic conditions, including Federal Reserve policy and the performance of the US dollar.

“Waves of favorable regulatory narratives continue to support the spot market,” Singaporean crypto trading firm QCP Capital wrote in a note to investors on Monday. “However, things will not go smoothly in January, because structural risks are lurking.”

The US Treasury Department is expected to reach its debt limit by mid-month, forcing the country to take special measures to continue paying government bills, for example.

“This could cause market volatility as discussions on the issue intensify,” QCP wrote.