29.12.202118:12 Forex Analysis & Reviews: Bitcoin and the "first week of the year effect": what to expect from BTC in January

Bitcoin reached the support level of 46,934.61 very quickly. The fall of the main cryptocurrency in the last two days is probably due to the approaching expiration of 129,800 option contracts, which are estimated to be worth approximately $6 billion.

Technically, two scenarios are visible from here. The first is a recovery to the resistance at 51,697.58 (green horizontal dotted line), as noted in Tuesday's review. The second is a deepening of the downward correction and a fall in the price to the area of $42,000 per coin.

But the expiration will pass, the year will end, and in 2022 the market may face new ups.

Will the year start with recovery?

Bitcoin traders expect a recovery to begin in the first week of 2022, as the price has now reached a meaningful support level.

Crypto analyst and economist Alex Kruger, argues based on historical data that not all hopes for Bitcoin's growth have been lost. He mentioned that the main cryptocurrency has historically performed well in the first week of the year. That's what he calls the "first week of the year effect."

Kruger looks at the near-term prospects for Bitcoin like this:

"Still expect a strong crypto up market in early Jan driven by fund inflows. Then risk-off ahead of the next FOMC (Jan/26) if the next inflation print comes in too hot."

Strong Signs of Increasing Institutional Demand

Noelle Acheson, head of market insights at Genesis Trading, told CNBC on Tuesday that she sees "strong signs" that institutional cryptocurrency investment growth will accelerate in 2022.

She described the growth in institutional demand in the crypto market as "astounding" over the past 12 months.

Medium-term investors accumulate BTC

Bitcoin medium-term holders continue to hold their ground despite the recent drop, according to on-chain analyst firm Glassnode. Some mid-term holders did not sell their coins for over a year, with supply hitting a 10-month high of 56.862%.

Against this background, there are prerequisites for growth. But before directional movement appears on the market, it is worth waiting out the holiday calm. The market is thin, and there may be both a damping of volatility and sharp movements until the end of the year, however, without changing the main trends.