Bitcoin Price Gains Strength Above $42,000: What’s Next?

• Bitcoin (BTC) and the overall cryptocurrency market experienced a strong correction on Tuesday, December 26. The price of Bitcoin dropped by around 3%.
• The potential impact of institutional interest in spot Bitcoin ETFs from companies like BlackRock Inc. and Fidelity Investments remains uncertain.
• According to Nic Carter, there is high confidence in the market that the U.S. Securities and Exchange Commission (SEC) will approve spot Bitcoin ETFs by January 10.

Bitcoin’s price is recovering after the sharp drop on Tuesday: December 29th could be crucial for BTC!

Bitcoin Price Back Above $42,000

Bitcoin (BTC) and the overall cryptocurrency market experienced a strong correction on Tuesday, December 26. The price of Bitcoin dropped by around 3%, but it found strong support above the $42,000 level. Bitcoin went through a pullback as traders evaluated potential reactions in the cryptocurrency market following regulatory decisions on the first exchange-traded funds (ETFs) directly investing in U.S. securities.

A fundamental consideration is whether the approval or disapproval of these products will lead investors to engage in profit-taking, as investors tend to “buy the rumor, sell the news.” The potential impact of institutional interest in spot Bitcoin ETFs from companies like BlackRock Inc. and Fidelity Investments remains uncertain.

According to Nic Carter, co-founder of Castle Island Management LLC, there is high confidence in the market that the U.S. Securities and Exchange Commission (SEC) will approve spot Bitcoin ETFs by January 10. According to him, these funds are expected to attract a broader range of cryptocurrency investors in the medium term.

However, Carter also pointed out the possibility of short-term “news-selling activity.” As expectations for the early approval of Bitcoin ETFs emerged, BTC whales began moving large amounts of assets.

What to Expect for BTC Price?

As we approach the end of the year, it is recommended to be cautious and prepared for possible volatility in the coming week. Factors contributing to potential market fluctuations include year-end flows, expiration dates of options and futures contracts, and the overall market environment created by thin liquidity due to the holiday season.

Traders and investors should review and adapt their strategies considering these factors. Greg Moritz, co-founder of AltTab Capital crypto hedge fund, said: “The main thing on our radar right now is the expiration of BTC options on December 29. Typically, when we see such a large option expiration day, we expect significant volatility on that day.”

The combination of Christmas celebrations and the annual turn of the year has led to a significant decrease in implied volatility (IV), affecting short-term options expiring on the last trading days of the year. Despite Bitcoin’s impressive threefold increase throughout the year, IV did not drop below 70% according to GreeksLive data.

This marks a notable milestone in the history of the crypto options market and will likely serve as an example for the future of the cryptocurrency market. IV staying below 70% indicates the maturation of Bitcoin derivatives and the increasing prominence of crypto ETFs as an expected mainstream investment vehicle.