Bitcoin December Market Analysis: Pullback from Highs to Potential Support Test

The Bitcoin market experienced significant volatility in 2025, peaking at approximately $126,210 on October 6th, before entering a correction phase. As of December 20, 2025, the price hovered around $88,000, a drop of about 30% from its peak. This correction was closely related to macroeconomic events, technical indicators, and market sentiment. This article provides an objective assessment of the current situation, key levels, and potential future trends of Bitcoin based on the latest market data and technical analysis. Since the beginning of the year, Bitcoin has benefited from institutional adoption, inflows into spot ETFs, and reduced supply after the halving, causing its price to climb rapidly from the end of 2024 to above $126,000. However, after the October peak, profit-taking and a sell-off in risk assets caused prices to fall below $90,000. In early December, prices tested the $80,000-$84,000 support zone but subsequently rebounded to the $88,000-$90,000 range. Recent trading shows that short-term rallies are often suppressed by selling pressure, similar to the rapid retracement after previous 3% gains. On the macro level, US November CPI data showed inflation falling to 2.7%, lower than expected, but the market questioned the report's reliability due to data collection disruptions caused by the government shutdown. Goldman Sachs and other institutions pointed out that the November data may be distorted, and the December CPI (to be released in January 2026) will provide a more accurate signal. The Federal Reserve maintained its interest rate policy in December, but market expectations for future rate cuts weakened. Meanwhile, the Bank of Japan raised its benchmark interest rate to 0.75% on December 19, the highest level in 30 years. This move was initially seen as a potential risk event that could trigger the unwinding of yen carry trades, but Bitcoin rebounded slightly to above $88,000 after the decision, indicating that the negative impact of the event on the market was limited. Technical analysis shows that Bitcoin is in a downward channel. On the daily chart, the price has formed a series of lower highs and lower lows, confirming a downward trend. Regarding key moving averages, the 20-period and 50-period moving averages provide short-term resistance, while the 200-period moving average is at a low level and may become a target for a deeper pullback. The MACD indicator is rolling in negative territory, indicating weak momentum; while the RSI is near oversold territory, it has not yet formed a clear bullish divergence. Historical data shows that Bitcoin typically retraces 40-50% from its peak during bull market cycles. Currently, a 50% retracement from the $126,000 high corresponds to approximately $63,000. This coincides with the 200-period moving average on the weekly chart (currently around $57,000-$60,000). Regarding support levels, $80,000 is a key psychological and technical support level in the near term, having been tested multiple times. A break below this level could lead to a rapid decline to $74,000 (near the April 2025 low). Deeper support lies in the $63,000-$70,000 range, which aligns with historical bear market retracements and is close to the 200-week moving average. Resistance is at $90,000-$94,000; a break above this level could trigger a short-term rebound to the lower $90,000, but this would require increased volume and indicator reversals. From a wave theory perspective, the current pullback can be seen as a downward extension of wave 5, the middle of a major wave 3, followed by a potential wave 4 rebound, and then the completion of wave 5's downward movement. The overall structure indicates that Bitcoin is still in a larger-cycle correction phase, with a potential bear market target of 50% or higher. Historically, Bitcoin has experienced 80-90% corrections during bear markets, corresponding to levels below $25,000 from the current high, but this is an extreme scenario requiring a sustained risk-averse environment. Regarding market sentiment, the Fear & Greed Index shows extreme fear, which may benefit a short-term rebound, but long-term holders face pressure. The derivatives market shows increased liquidation of long positions, and higher leverage ratios increase volatility. At the institutional level, inflows into spot ETFs have slowed, with some funds shifting to other assets, but long-term holders continue to accumulate positions. Bitcoin often experiences selling pressure around Federal Reserve meetings, consistent with the "sell the fact" phenomenon during rate cuts. Although rate cuts should benefit risk assets, prices have fallen after multiple rate cuts in 2025, reflecting market concerns about a soft landing for the economy. The unwinding of yen carry trades has previously triggered declines in the crypto market, but Bitcoin did not experience a significant crash after the Bank of Japan's recent interest rate hike, indicating increased market resilience. **Short-Term Outlook:** If it holds above $88,000, it may test the $90,000-$94,000 resistance level, forming a counter-trend rebound. However, if it falls back, a breach of $80,000 would accelerate the decline to $74,000. **Medium-Term (to January 2026)**, a potential bottom may be in the $63,000-$74,000 range, forming a divergence followed by a rebound. **In the long term, the 2025 correction may be the accumulation phase for the next bull market. A break above $94,000 and a bullish Ichimoku Cloud reversal could lead to new highs.** Risk factors include macroeconomic uncertainty, inflation data distortion corrections, geopolitical events, and regulatory changes. Bitcoin history shows that deep corrections are often followed by strong rebounds, with bear markets averaging 12-18 months. Overall, the current Bitcoin market is in the middle of a bear market correction, with selling dominating the rebound and signals leaning towards bearish. Investors should pay attention to key support tests and indicator divergences. Although short-term volatility is high, historical cycles indicate that major bottoms are often accompanied by extreme sentiment.