Analysts from Wolfe Research point to a rare moment of 'highest level of divergence' in the crypto market, where sentiment is split between those calling for a bear market and those expecting further declines. Bitcoin remains above USD 90,000 while major digital assets have fallen 20-50% within just three months.
This divergence occurred before a major price reversal, according to the company. The Wolfe Research team has identified technical indicators and momentum that could determine the direction of Bitcoin until the end of the year.
The market's divergence creates a historical situation.
Rob Ginsberg and Read Harvey, analysts from Wolfe Research, explain that today's crypto market shows a clear divide.
Half of the participants believe that the bear market has just begun, while the other half sees the price base as already firmly established.
This extreme divergence, which the company refers to as the 'highest level of divergence', occurred prior to significant turnaround periods in the past.
Even though Bitcoin recently broke USD 90,000, the broader market still faces issues. Almost every major cryptocurrency has dropped 20% to 50% over the past three months, indicating that risk appetite remains low. Capital movement continues to be weak, limiting excitement beyond daily price movements.
Wolfe Research adopts a neutral stance, pointing to an approaching opportunity for investors, while still predicting that Bitcoin may touch down near USD 75,000, even though current prices are much higher. If their scenario plays out, that would mean a further decline of 23%.
The long-term support zone in the crypto market strengthens this analysis. These technical areas are often the lows of the latest cycle and are key turning points that help guide current price movement.
The ETF inflow signals institutional hesitation.
One key indicator of sentiment is found in the flow of crypto ETFs (exchange-traded funds). The inflow of Bitcoin ETFs remains weak, making it hard for the asset to maintain a price above USD 90,000.
Institutional investment, which was strong earlier in the year as Bitcoin ETFs began to launch, has clearly slowed down.
Recent ETF inflow data shows that in November and December, there were significant withdrawals from major Bitcoin ETF products. These trends indicate that large investors may be reducing risk or hesitant to increase investment.
Buying pressure has not returned alongside Bitcoin's price recovery. A combination of slow ETF flows and declines in all digital assets creates a challenging environment for continued recovery. Retail investors still hold differing opinions, reflecting institutional uncertainties.
Technical indicators suggest emerging momentum.
The momentum indicators are showing improvements, despite an overall cautious outlook. Daily MACD readings indicate that positive momentum may be building up. However, analysts warn that it is still unclear whether this movement signifies a full recovery or just a temporary pause.
Bitcoin is approaching two important technical levels. The 50-day moving average around 98,165 USD is the first challenge. Above that, the key psychological resistance is 100,000 USD, which is difficult to reclaim and maintain.
Wolfe Research views this recent short-term rebound as positive. Their analysis suggests that crypto assets are returning to the previously found support zone, which adds context to the technical backdrop.
Overall, these factors create a complex environment. Strong technical resistance, weak institutional flows, and asset declines compete against improved momentum and historical support zones. This narrative sets the stage for changes for Bitcoin and digital assets.
Diverging views define market trends.
Both in social media and among analysts, market sentiment is distinctly divided. Some express significant skepticism about Bitcoin's current levels, claiming these valuations are unsustainable and cite market mechanisms like stablecoin issuance as evidence.
Another group believes that the downward adjustment has ended, referencing the positive technical support that Wolfe Research has pointed out. This group sees current prices as an opportunity ahead of an expected recovery. The debate reflects uncertainty surrounding various factors such as macroeconomic trends, regulations, and institutional adoption.
The upcoming week may reveal which view is correct. If Bitcoin can break through and hold above $100,000, the bullish side may gain an advantage. However, if the price falls below $90,000, it could ignite new selling. Wolfe's signal of 'extreme disagreement' may unravel soon and could spark a reversal like seen in previous cycles.
