Bitcoin (BTC) started the new year on a high note after tapping the six-figure mark in 2024. Most observers expect 2025 to be just as remarkable, with projections putting BTC at $185,000 and higher.
The road, however, could be downright bullish as expected, as recent price action suggests that sellers are looking to reassert themselves, raising the possibility of a dramatic price drop in the future.
We refer to price action in December, when bitcoin reached a record high above $108,000 but ended the month in the negative, below $94,000, registering its first monthly loss since August.
The two-way price action formed a bearish reversal candlestick pattern called a “shooting star” on the monthly chart.
The candle features a long upper wick or shadow, which shows a large gap between the high and the open for the given period, paired with a small body, which represents a small difference between the open and the close. The wick must be at least twice the size of the body, and the bottom wick can be the smallest. In the case of BTC, the upper wick is about four times larger than the body, with a small lower wick.
The shooting star shape shows that buyers initially drove prices higher, only for sellers to take control near the high and push prices below the opening level, indicating another bearishness in the market.
“Bears are potentially controlling,” explains the CMT Association’s Level III textbook, which sheds light on the psychology behind the shooting star pattern.
The shooting star appeared after a notable uptrend from $70,000 to above $100,000, warning of a potential bearish reversal ahead, which will be confirmed if prices break below the December low of $91,186. That’s the level to defend for the bulls.
Note that similar candles with longer upper wicks mark previous bull market tops.
Short term pain
The latest shooting star’s cautious message fits the broader macroeconomic landscape, which indicates challenging times for risk assets. It is mainly driven by recent hawkish signal from the Fedalong with rising Treasury yields and a dollar index strengthening.
Analysts, however, are confident that the Fed will reverse its recent decision to signal fewer rate cuts for 2025, ensuring a bullish broader trajectory for BTC and risk assets in general.
My prediction for 2025 is simple: higher. Nothing has fundamentally changed since Nov. 5. February will be the best performing month, with recent Fed hawkishness still holding the broader markets back in the short term,” said trader and analyst Alex Kruger at X.
“The Fed will turn dovish sometime in Q1, with traders pricing in more cuts,” Kruger said.
