Bitcoin Price Could Rally To $178,000 If History Repeats — Here’s Why

As Bitcoin currently faces a downturn and now seeing a recovery suggesting a preparation for its next bull run, market participants appears to be analyzing trends in exchange leverage and liquidity. Particularly, CryptoQuant has pointed out that leverage ratios on centralized exchanges have become a focal point, offering insights into the potential risks and opportunities shaping the crypto market.

The platform’s recent data highlights the importance of assessing these ratios to gauge the financial stability of exchanges and the impact on trading dynamics.

Leverage Trends And Exchange Stability

A detailed analysis revealed that Binance maintains strong reserves relative to its open interest, signaling a strong ability to manage market volatility. In contrast, smaller exchanges like Gate.io and Bybit exhibit higher leverage ratios, raising questions about their capacity to withstand liquidity crunches.

According to CryptoQuant, monitoring these metrics has become even more “critical” in light of past events, such as the collapse of FTX in November 2024, which was triggered by insufficient reserves against high open interest.

CryptoQuant’s latest findings further highlight the varying leverage strategies employed by major cryptocurrency exchanges. Binance emerged as a leader in maintaining a stable leverage ratio while expanding its Bitcoin open interest from $4.45 billion in December 2023 to $11.64 billion in December 2024.

Despite this growth, Binance’s Bitcoin, Ethereum, and USDT reserves have consistently exceeded its open interest, ensuring liquidity and stability even during volatile market conditions. The exchange’s leverage ratio, which rose modestly from 12.8 to 13.5 over the past year, remains the lowest among its peers.

Conversely, exchanges like Gate.io, Bybit, and Deribit exhibit significantly higher leverage ratios of 106, 86, and 32, respectively. CryptoQuant wrote:

Coinbase Premium: A Key Indicator For Bitcoin Traders

Beyond leverage ratios, another crucial metric shaping Bitcoin market sentiment is the Coinbase Premium. This indicator, which tracks the price difference between Bitcoin on Coinbase and other exchanges, is a barometer for institutional demand and market trends.

A CryptoQuant analyst named BQYoutube suggested that traders adopt a cautious approach based on Coinbase Premium signals: When the premium is negative, it may be wise to stay on the sidelines.

However, a positive premium often signals the return of strong demand, offering a strategic entry point for traders looking to ride major market trends.

According to the latest data, this metric currently sits on the negative side, suggesting to stay on the sidelines. BQYoutube added:

Featured image created with DALL-E, Chart from TradingVie

The crypto market is recovering, with assets like Dogecoin bouncing back from multi-month lows. The Dogecoin price has jumped by 12.67% in 24 hours, pushing the meme coin to the $0.3379 price mark. With current on-chain data, there is more ahead for DOGE.

Dogecoin signals more uptrend

Beyond the 24-hour price gain, Dogecoin has recorded a 9.6% jump in trading volume, with more than $11.6 billion shuffled in one day. This massive volume proves there’s enough liquidity to power the meme coin’s trading volume, a unique boost for a price rally.

Over the past week, Dogecoin dropped from a high of $0.4109 to as low as $0.27. While Bitcoin’s correction was the only causative factor, DOGE joined the list of altcoins that suffered the brunt. With the market in recovery mode, the coin has yet to reach its weekly high, marking enough room for growth.

On-chain indicators also hint at intense activity within the DOGE ecosystem. Whale transactions, as seen on IntoTheBlock, show intense activities. This metric, accounting for Dogecoin transactions worth at least $100,000, skyrocketed by 41.12% to $23.35 billion.

With massive embrace from this class of investors, chances are the price will recover swiftly to cover the past week's losses.

Key fundamentals to watch

To complement the growth in the price of Dogecoin, crucial fundamentals form a major backbone to watch. There are insinuations that a DOGE ETF might become a reality amid the positive shift in the regulatory landscape in the U.S.

While no asset manager has made a push for this filing, many experts have weighed the possibility. In all, DOGE remains oversold on different timescales, and related sentiments around BTC retesting its all-time high can drive positive momentum for the meme coin.

Dogecoin might reclaim the $0.4 price mark in the short term if it flips the $0.35 resistance as support.

Michael Saylor, the Executive Chairman of MicroStrategy, has outlined a Bitcoin strategy to position the United States as a global leader in the digital economy.

This move comes as his company expanded its Board of Directors from six to nine members, incorporating prominent crypto advocates to strengthen its strategic focus on digital assets.

Saylor Advocates for Bitcoin Reserve

On December 20, Saylor explained that his vision revolves around implementing a Strategic Bitcoin Reserve (SBR) to address economic challenges, enhance the dollar’s dominance, and create unprecedented growth opportunities in the digital asset sector.

Saylor’s proposal outlines how a robust digital asset policy could create a capital markets renaissance, unlocking trillions in value. He envisions a $10 trillion digital currency market driving demand for US Treasuries while fostering growth in digital assets.

He also believes that expanding this market could increase the digital economy’s valuation from $1 trillion to $590 trillion, with the United States leading the charge.

Despite these bold claims, critics like venture capitalist Nic Carter remain skeptical. Carter argues that the SBR concept lacks clarity and could destabilize markets rather than strengthen the dollar.

He points to Bitcoin’s volatility, referencing its recent price dip from over $108,000 to $92,000, as evidence that it may not be a reliable reserve asset. Additionally, Carter believes such a move could undermine the dollar’s global position rather than enhance it.

New MicroStrategy Board Members Bring Crypto Expertise

According to a December 20 SEC filing, the board of Bitcoin-focused company has elected new board members. The new additions include Brian Brooks, former Binance US CEO and a prominent figure in crypto regulation; Jane Dietze, Chief Investment Officer at Brown University; and Gregg Winiarski, Chief Legal Officer at Fanatics Holdings.

These new board members bring diverse expertise across finance, technology, and emerging markets, aligning with MicroStrategy’s broader strategic objectives. Brooks, in particular, is renowned for his regulatory and crypto expertise. He has held leadership roles at top crypto firms, including Coinbase and BitFury Group, and has also served as the Acting Comptroller of the Currency.

Meanwhile, Dietze has also served on the crypto asset management firm Galaxy Digital board, while Winiarski has experience with a privately held global digital sports platform.

MicroStrategy is the largest publicly traded corporate holder of Bitcoin. According to Bitcoin Treasuries data, the company currently holds 439,000 Bitcoin valued at over $43 billion.

Amid a wider readjusting of market expectations for interest rate cuts by the Federal Reserve (Fed) for 2025, investors withdrew a record $680 million from Bitcoin ETFs on Thursday, the highest outflow in a single day since January’s approval of these investment funds.

Grayscale And Bitwise Bitcoin ETFs Experience 8% Decline

As Bitcoin ETFs faced this outflow, the price declined, dropping another 5% to trade around $97,400 to close the week. The sell-off aligns with a general downturn in risk assets, triggered by the Fed’s updated economic projections released earlier this week.

The US central bank now anticipates only two quarter-point rate cuts in the coming year, a significant reduction from the four cuts previously expected at its September meeting.

Notable Bitcoin ETFs, including Grayscale’s Bitcoin Trust and Bitwise’s Bitcoin ETF, have experienced declines of approximately 8% since the Fed’s new guidance, while Bitcoin itself has lost about 9% in the same timeframe.

Notably, Thursday’s outflows broke a streak of 15 consecutive days of inflows for the twelve US Bitcoin ETFs, for a net inflow of approximately $5.3 billion during this period.

After hitting a record high of just over $108,000 earlier in this week, the market’s top cryptocurrency dropped below the $100,000 level on Thursday. Prior to the recent recovery, which is just around $100,000, it fell all the way to $92,000.

While the bearish sentiment in the markets can be attributed to the Fed’s cautious stance, it is also likely influenced by seasonal profit-taking among institutional investors of the Bitcoin ETFs.

Analysts Warn Of Continued Crypto Sell-Off

The recent selling pressure could further strain market sentiment, as noted by Joseph Dahrieh, managing principal at Tickmill.

“This decline could weigh strongly on the cryptocurrency and broader market sentiment, particularly as Bitcoin fell below the USD 100,000 mark, indicating potential short-term volatility and downside risks,” he remarked.

The volatility has been exacerbated by massive liquidations in both long and short positions, totaling over $240 million within a 24-hour period. Antonio Di Giacomo, a senior market analyst at XS.com, commented, “The Federal Reserve’s cautious stance in signaling fewer cuts for 2025 created an atmosphere of doubt and speculation.”

Looking ahead, the sell-off in the cryptocurrency market may persist in the near term. Alex Kuptsikevich, chief market analyst at FxPro, speculated that the total market capitalization of cryptocurrencies could drop below $3 trillion, down from a peak of $3.7 trillion earlier this month.

He cautioned that “a failure below $94,500 would signal a break of the uptrend of the last six weeks, while a fall below $92,000 would bring the price under the 50-day moving average. In this case, time is playing on the side of the bears.”

As of this writing, Bitcoin has managed to stabilize above $97,400 as the week draws to a close, despite registering 4% losses over the previous 24 hours.

Featured image from DALL-E, chart from TradingView.com

Due to yesterday’s crypto market rout, Ethereum (ETH) has now faced rejection at the key $4,000 resistance level for three times since March 2024. The second-largest cryptocurrency by reported market cap is now trading at the $3,400 level, down 6.7% in the past 24 hours.

What’s Behind Ethereum’s Underwhelming Price Performance?

While ETH has posted a respectable 47% year-to-date (YTD) gain, it has been outpaced by other major cryptocurrencies like Bitcoin (BTC), Solana (SOL), and XRP, which have recorded significantly higher returns in the same period. Several factors appear to be holding back Ethereum’s price momentum.

One contributing factor is Ethereum’s comparatively weaker brand recognition versus Bitcoin. This was highlighted by the lackluster response to the launch of spot ETH exchange-traded funds (ETFs) in August. The introduction of these ETFs failed to generate any meaningful price movement for ETH.

Data further reveals a significant disparity in investor interest between the two assets. The total net assets held in U.S. spot ETH ETFs currently amount to $11.98 billion. In contrast, spot BTC ETFs hold $109.66 billion – nearly ten times as much.

Additionally, yesterday saw over $60 million in outflows from spot ETH ETFs, marking the largest single-day outflow since November 19. Crypto analyst Ali Martinez pointed out that social sentiment around ETH has reached its lowest point in a year. However, based on historical trends, this could paradoxically signal a bullish opportunity for Ethereum.

Futures traders have also turned bearish on ETH, as the aggregated premium for futures positions flipped negative for the first time since November 6. The market downturn triggered Ethereum’s largest liquidation event since December 9, with $299 million liquidated in a single day. Such large-scale liquidations often lead to cascading sell-offs and heightened price volatility.

Another recurring concern stems from the Ethereum Foundation’s tendency to sell ETH near local price peaks. In a recent X post, Lookonchain noted that the Ethereum Foundation sold 100 ETH on December 17. Following this sale, ETH’s price has dropped approximately 17%.

Further skepticism surrounds Ethereum’s supply issuance. A recent Binance Research report highlighted that ETH’s relatively high issuance rate raises questions about its “ultrasound money” narrative, which suggests Ethereum is a deflationary asset.

Is Ethereum Set For A Bounce?

Seasoned crypto analyst @Trader_XO stated that they bought spot ETH at the $3,200 price level yesterday. The analyst added that they expect “a good few weeks” of price consolidation before ETH’s next leg up.

Meanwhile, crypto trader @CryptoShadowOff identified a potential ascending triangle formation on ETH’s monthly chart. According to their analysis, ETH could drop further to the $2,800 range before targeting a new all-time high (ATH).

Market analyst @CryptoBullet1 emphasized that on the 4-hour chart, ETH has not been this oversold since August 5, indicating a bounce may be on the horizon. At press time, ETH trades at $3,400, down 6% in the past 24 hours.

Bitcoin (BTC) neared $100,000 on Dec. 21 after a “monster” BTC price bounce delivered snap upside.