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December disappoints as BTC fails to set new highs ahead of new year

2022.01.13 Hunain Naseer

A look at the crypto market’s developments and performance in December 2021 — Market Watch Monthly

Key takeaways

  • December saw BTC falling as low as 41,241 USDT.
  • There was a brief relief for the markets leading up to Christmas.
  • OKX trading data showed a minor decline in volumes but spot maintained its share.
  • BTC bulls are looking to find a price bottom in January.

Bitcoin recap

After a strong first half in November, Bitcoin started showing weakness that extended into December. Given BTC’s historically strong returns in these two months, market participants expected a strong rally to mark the year’s end. However, that never materialized, as the market leader broke through several support levels on its way down from 69,000 USDT to 41,241 USDT, per the OKX BTC/USDT price.

This price action meant that Bitcoin closed December with a loss of 16.14% after bouncing from 41,000 USDT levels to nearly 48,000 USDT. However, December was more volatile for BTC compared to November, with a high-to-low price range of over 30%.

OKX’s BTC/USDT monthly chart ending Dec. 31, 2021. Source: TradingView

From a technical analysis perspective, January has extended Bitcoin’s losses so far, and BTC recently tested the support level it set in September 2021 at around 39,500 USDT. If the bounce from here takes BTC past 48,000 USDT (the December closing), we can expect more upside. Until that happens, the downtrend is likely to persist.

Federal Reserve plans remain key for global markets

As highlighted in last month’s report, the major risk faced by all markets, including Bitcoin, remains the U.S. Federal Reserve’s hawkish policy changes. The December Federal Open Market Committee meeting saw members recognizing the growing inflation threat and committed to doubling the pace of asset purchase tapering in the coming months.

This tapering schedule and potential interest rate hikes to follow will dictate market confidence moving forward. For now, with these policy changes, we saw mixed reactions across the board.

By the end of December, BTC was down 16.14%, the Nasdaq Composite Index was down 0.69%, the S&P 500 was up 4.36%, oil rose by 12.56% and gold by 3.11%. The U.S. dollar, however, fell by 0.23%.

Bitcoin fell the most compared to other asset classes in December. Source: TradingView

December’s OKX trading data shows slight volume decline

With prices sliding sharply in both November and December, OKX trading data showed a small decline in volumes — in line with market sentiment.

Within the volumes, however, spot maintained its share while swaps saw an increase at the expense of futures.

Breakdown of OKX trading volumes for November 2021. Source: OKX

As for the total breakdown, spot trading accounted for 26% of all volume in December (the same as November) followed by swaps accounting for 54% (up 3% from last month) and futures down 3% in the same period.

Alts mostly down, but LUNA pushes on

Altcoins had started declining in November as market sentiment turned bearish. These losses continued in December, with alts losing more than BTC in general.

For instance, while BTC was down 16.14%, ETH lost 17.86%. Similarly, other historically strong performers, such as SOL, also saw losses after months of staying in the green. 

LUNA, however, was once again the standout performer with a massive monthly gain of 54.84% in December as it traded above 100 USDT at one point.

LUNA stayed strong while most alts were red in December. Source: OKX

DeFi TVL hit, but DEX volumes stay above $100B

Decentralized finance protocols saw total value locked figures remain relatively muted in December, and the month ended with the TVL at almost $86 billion — down roughly $10 billion from November, per DeFi Pulse data.

DeFi value locked figures for the last three months. Source: DeFi Pulse

The drop in TVL reflects the changing market sentiment, to some extent, as traders seek to take profits during a falling market instead of keeping their assets staked.

As per data from Dune Analytics, however, decentralized exchanges remained popular and saw another $100 billion in volume in December.

DEXs saw volumes crossing $100B again in December. Source: Dune Analytics

Top DeFi assets continued to put up a mixed performance in December. Only SUSHI saw major gains, followed by CRV — at 33.21% and 16.39%, respectively. Others, including MKR and COMP were down more than 20%.

DeFi assets as a whole remained under pressure in December. Source: OKX

Looking ahead

November’s 69,000 USDT has marked a BTC top for now, with no real signs of a reversal taking us above those levels anytime soon. The Dec. 4 flash crash set a new recent low that was then breached in early January as BTC tested the 39,500 USDT support. 

Moving forward, bulls will be looking to reclaim 48,000 USDT while bears will be wanting another retest of the sub-40,000 USDT range, hoping to see a breakdown.

The FOMC meeting set for the last week of January is likely to reveal more cues as to the market’s possible direction in the months that follow.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.