Bitcoin remains under strong pressure from sellers and cannot find enough catalysts to overcome the $17,000 resistance.
The bearish flag on the daily chart confirms the scenario of further fall of the cryptocurrency to the $15,600 level.
In recent days, the stock market has faced turbulence due to macroeconomic factors and other developments in the crypto space.
Analysts expect further lows in the price of Bitcoin in the future, and the possibility of another correction of 20% from current values cannot be ruled out.
A retest of the November lows around $15,600 is not ruled out. Eventually, Bitcoin could renew these lows, increasing the risk of reaching long-term support around $13,900.
Catalysts to further fall
The year 2022 has become one of the largest crypto winters in the history of the industry. Bitcoin has fallen by 75%, and most altcoins have lost almost 90%. On the other hand, the Fed has made it clear that it will continue to raise rates over the next 2023.
If so, there is a strong possibility of a correction in the US stock markets next year. Since the cryptocurrency has a close correlation with US stocks, further declines can be expected in the cryptocurrency market as well.
A growing consensus among experts is that, given the Fed's determination to continue tightening, a US recession and a sell-off in US stocks is the key scenario for 2023.
Cryptocurrency prices could experience another, perhaps the last, drop in this cycle before interest rates become more favorable.
Wave analyst sees a rebound, but not for long
Cryptocurrency strategist alias Smart Contracter, who previously correctly predicted the BTC bear market in 2018, notes that a rebound is foreseen for the main cryptocurrency.
His wave analysis suggests that Bitcoin will rise in the near future before another wave down to a target below $16,000 begins.
"Five waves down from the false high of this range have now formed on the 4-hour chart, which is a confirmed trend reversal in my opinion. We expect further weakness to the lower end of the range after we get a countertrend bounce over the next few days."
Smart Contracter is a popular practitioner of Elliott Wave Theory, an approach to technical analysis that attempts to predict future price action by following the crowd psychology that tends to show up in waves.
According to the theory, the bearish asset usually bounces after the completion of the five-wave retracement before resuming the downward trend.
Based on it, the analyst predicts a short-term surge in Bitcoin on its way to $17,500 before another five-wave correction to $15,600 occurs.
DXY dynamics matter
Smart Contracter also pays attention to the dynamics of the US dollar index (DXY), which measures the value of the dollar against a basket of fiat currencies.
It has been pointed out repeatedly before that a strong dollar index suggests that investors are running to the safe-haven US dollar at the expense of risky assets such as cryptocurrencies.
The DXY looks bullish on the monthly chart, the analyst said, after the multi-month diagonal breakout of the DXY on Friday, which is not good for bulls in risk assets.
More regulation is expected in the cryptocurrency industry
Grayscale CEO Michael Sonnenshein said in an interview with CNBC on Monday that he expects more regulation in the cryptocurrency industry.
The current crypto winter is not new for the firm, the company has already experienced periods of prolonged market decline.
"It is a crypto winter, we've been through this before, unfortunately, we are going through it again, and we may have to go through it again in the future. At the moment, what you're going to see in this crypto winter would be more regulation and more consolidation in the industry. We've seen time and again bad actors weeded out of the ecosystem, and crypto emerges more resilient and stronger each time we see a winter."
When asked if he expects things to play out the same way this time around, Grayscale's CEO said yes. He added that:
"I've been in the crypto space for nine years. I've been through all kinds of cycles, and I've never been more confident and optimistic that crypto as an asset class is here to stay."
It is worth noting that the Grayscale Bitcoin Trust (GBTC), the flagship investment product offered by Grayscale, has been down in recent months.
Last week, Grayscale Bitcoin Trust (GBTC) shares reached an all-time high discount to the price of Bitcoin, exceeding 50%.
Concerns about Grayscale's reserves, higher fees and other issues have led to such a high discount, which may continue in the near future.
The increase in the discount came shortly after the US Securities and Exchange Commission (SEC) confirmed its reasons for rejecting Grayscale's application to convert GBTC to an exchange-traded fund (ETF).
