Two end-of-December scenarios that will determine the 2023 trends
The December result is a very important indicator. It will determine the 2023 year for the cryptocurrency market and, from the point of view of technical analysis, can define future price movements and trends.
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At the end of December, we expect the closing of the monthly, quarterly, and annual candles. Of course, we mean the Japanese candle, not the votive one. This article will discuss technical analysis, so brush up on your trading slang. Beginners may find the article challenging, but they can always learn new words from the crypto glossary.
Investors are currently in a difficult situation. External factors and regulators are putting increased pressure on them. The Fed is putting pressure on them. Pressure comes from inflation, which even in developed countries has already reached double digits. The devaluation of all the top fiat currencies, along with the collapse in energy and stock prices, have tipped investors over the edge. The bankruptcy of exchanges and crypto startups, as well as the sharp decline in the profitability of large mining farms, do not contribute to optimism.
A recession is on the way, one that the Fed refuses to believe in until the very end, but burying their heads in the sand will not make the trouble pass them by… It is difficult to determine which factors do not yet have an impact on the crypto market. However, you need to trade and have faith that victory is coming! The triumph of good over evil! The triumph of decentralized finance over a dying fiat system based on the monopoly issuance of paper money by central banks! Papers with no backing other than governments' faith in a bright future brought about by the continuous work of printing presses in banknotes and mints.
We offer to examine two scenarios, the outcomes of which will determine the dynamics and trends at the start of the new 2023! Let's move forward, then!
Positive scenario
The cryptocurrency market has been dominated for more than a year by a downtrend, FUD, and the sale of crypto assets. A prolonged downtrend has already resulted in a 77% drop in Bitcoin's price from $69,000 to $15,500. Of course, this does not make investors feel any better, but there is still hope for the end of the month and the year as a whole.
The main battle between bulls and bears in December could be decisive for the entire market. Based on the outcome of this battle, it will be clear how we will begin 2023 and what trends will be observed in the first quarter, if not the first half of the year.
There is currently a bullish divergence and a wedge. The bulls managed to break through the dynamic support trend line. Any 4h candle that closes above $17,600 (the nearest resistance line) in the near future will be a positive sign for further upward movement. It is necessary to close the annual candle without a bearish engulfing to avoid a loss of last year's gains.
Red annual candle, which must be closed as high as possible before the end of the year.
The next condition for the formation of a positive scenario will be the closing of any daily candle above $18,200 (with the breaking of the further resistance line).
If any week (this or next) closes above $24,300-$25,500, it will be another positive signal for the market to move higher – there is a significant volume of short positions in this range.
According to the Bollinger bands, in order for the bulls to successfully close the month, quarter, and year, they must rise and gain a foothold above the $28,950-$29,000 zone before the end of the month. If this is accomplished, it will be confirmation of a trend change caused by buyer dominance. The key clusters to overcome upwards are $18,200-$19,200, $21,000-$22,000, and $24,500-$25,500 (MA200). The final range is a resistance line that was never broken in August of this year.
Key zones that the bulls need to break through in order to stop the bearish trend
Negative scenario
There is another scenario – negative. It will happen if the bulls are unable to maintain the $15,500-$18,400 range. If bearish momentum breaks through all support and trendlines, a new low could be set this year. The level of liquidity between $8,000 and $10,000 is the best scenario. This range was formed during the long downtrend that lasted from 2018 to mid-2021, and it is this range that attracts bears like a magnet.
Liquidity cluster targeted by bears
Nonetheless, we hope that, despite the market's dominance of negative sentiment and FUD, the extremely negative scenario can be avoided and that the “Christmas” positive scenario, which was described first in this article, will be realized.
Although investors and traders should always be ready for the unexpected, it is now wise to keep a reserve of stablecoins in your portfolio – at least 50% – so that you can buy more assets at the best possible prices if the market follows a negative scenario. Additionally, a new phase of market growth always starts after a downtrend.
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