Bitcoin Correction Potential to Reach $88,700, $125,000 Year-End Target Still in Sight
Bitcoin has been on a bit of a rollercoaster ride lately, with its sharp pullback from its record high causing a bit of concern among traders. Standard Chartered’s own Geoffrey Kendrick has pointed to a few factors for this decline, including a reduction in U.S. Treasury term premium and upcoming options expirations.
It seems that the significant reduction in U.S. Treasury term premium, following a recent announcement from President-elect Donald Trump’s Treasury Secretary, is what triggered this downward trend in Bitcoin. Bitcoin is often seen as a hedge against traditional financial issues, but when term premiums drop, its appeal as a hedge diminishes, at least temporarily.
Recent data from the New York Fed, which tracks term premium movements, backs up this connection between Treasury market activity and how the crypto market is performing. So, it’s no surprise that Bitcoin is feeling the impact of these changes.
In addition to the term premium reduction, there are also substantial monthly options expiries coming up soon. BTC options with strike prices ranging from $85,000 to $100,000 make up a significant amount of open interest. Historically, these options expirations can limit price movement, creating a magnet effect on spot prices.
Geoffrey Kendrick suggests that we could see Bitcoin drop below $88,700, the average purchase price for ETFs and MicroStrategy since the U.S. elections. This might lead Bitcoin to test its support zone before potentially bouncing back.
Despite these recent developments, institutional interest in Bitcoin remains strong. ETFs have seen inflows of approximately 77,000 BTC since the elections, and MicroStrategy has acquired an additional 134,000 BTC. However, Kendrick warns that this influx of institutional buying could potentially act as a temporary ceiling until broader market dynamics change.
It’s not just Bitcoin that’s been affected by this pullback— the wider crypto market has also seen declines in market capitalization. Futures markets have witnessed over $500 million being liquidated amidst the volatility, indicating a rise in risk aversion.
Despite these short-term challenges, Kendrick maintains his target of $125,000 for Bitcoin by the end of the year and a projection of $200,000 by 2025. He believes that Bitcoin is still in a structural bull market and is well-positioned to resume its upward trajectory once these temporary obstacles subside.
At the moment, Bitcoin is trading at $93,440, down 1.5% for the day, after reaching a high of $99,645 on November 22nd. So, while there may be some turbulence in the short term, the long-term outlook for Bitcoin remains optimistic.
