Rough start to a bullish week.

Compass 153

On our latest Weekend Playbook, we stated:

This weekend, Bitcoin must consolidate above $100K to establish higher objectives. With the market cleared of leverage, this favors Bitcoin’s price stabilization and a potential stronger Altcoin rally.

Bitcoin experienced a significant correction from $100K, touching $95K, liquidating just over $1.7 billion from the market. Combined with last week's liquidation, this brings the total to nearly $3 billion cleared from the market. Now that we are just above the $97.2K support what's next: a recovery or further correction?

Does Bitcoin need Microsoft, or does Microsoft need Bitcoin more?

• This Tuesday, December 10th, Microsoft shareholders are set to vote on a proposal to create a Bitcoin treasury. The results of this vote could potentially be known tomorrow. A favorable outcome would be extremely bullish for Bitcoin; however, an unfavorable decision is unlikely to have a negative effect. Currently, Polymarket assigns low odds to a positive outcome for Bitcoin, largely due to the Microsoft Board of Directors’ recommendation to vote against the proposal.

• Michael Saylor of MicroStrategy pitched the Microsoft board in a three-minute presentation, which he later shared on X (formerly Twitter). If the vote is negative, will there be an adverse impact on Bitcoin's price? It's likely we’ll see some short-term price manipulation, but nothing significant.

• If the incoming U.S. administration’s roadmap includes creating a Bitcoin treasury, it would make sense for leading U.S. companies, especially tech firms, to adopt similar measures. For now, many U.S. states are ahead of the federal government in this regard, and smaller companies—though not part of the Magnificent Seven—have already added Bitcoin to their balance sheets.

Speedometers indicating the current state of BTC. The full dot represents the current reading and the white dot represents one week ago.

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Market Sentiment and Retail Participation.

• Market sentiment remains in a state of extreme greed, although last week’s flash crash tempered bullish enthusiasm slightly and encouraged more caution.

Fear&Greed Index.

• It has been a month since we entered this extreme greed territory, a shift that occurred after the U.S. elections. Moderating this sentiment is crucial to avoid bull traps, but given the current context and pending fundamentals, it’s likely that even if Bitcoin's price corrects, this overly bullish sentiment will persist throughout the month.

CMC Fear&Greed Index.

• When Bitcoin reaches new highs, and sentiment follows, retail investors often enter the market with strength. A quick glance at Bitcoin's participant chart shows that short-term holders have been active.

Net Position Change In BTC.

• This marks the most aggressive retail entry since 2021, though it remains far from the peak participation levels seen during the last cycle. At that time, retail’s participation peak coincided with Bitcoin’s April 2021 high (pre-ATH of $69K), followed by a mass exit during Bitcoin’s 50% correction, from $63K to $30K.

• Despite retail’s strong entry and visible presence, they are not a short-term factor for a deeper price correction. While retail participation hasn’t reached previous cycle levels, it has surpassed this year’s peak short-term holder participation.

STH Supply

• We are yet to see a massive influx of retail investors into Bitcoin, similar to what happened in the previous cycle. Most likely, this peak in retail participation will also signal the market’s top, but for now, we are far from that point. It’s possible that we’ll see this surge next year, potentially pushing Bitcoin beyond its 2021 STH all-time highs.