Is Bitcoin at the Bottom? BTC Price Action is Inverse of December Peak Above $108K
The pressing question on the minds of crypto traders is: Has bitcoin (BTC) price weakness run its course, or is there more to come?
The first appears to be the case as Monday’s price action, characterized by rapid recovery from intraday lows, contrasted in mid-December when the rally stalled and turned lower from record highs above $108,000.
On Monday, BTC first fell as investment banks collapsed expectations for Fed rate cuts, with some discussing the potential for a rate hike following Friday’s stellar jobs report, causing prices to dip below the lower end of a key support zone $90,000-$93,000 as major US stock indices gapped less.
The break of support, however, was short-lived, and by the end of the day, BTC rose back to $94,000, leaving a classic “long-legged Doji candle.”
A long wick indicates downtrend exhaustion, indicating that although sellers initially drove prices lower, buyers ultimately overcame them. This pattern is often seen as a potential signal of a bottom, mainly when it occurs at key support levels or after a dramatic price drop, as is the case for BTC.
The long-legged doji broke out of the support zone (horizontal lines) which has been restricting the downside since late November.
The opposite of the above is what we saw on December 16 when bulls failed to keep prices at record highs above $108,000, printing a doji candle with a longer upper shadow. That’s a sign of an uptrend running out of steam, with sellers looking to reassert themselves.
What’s next?
While Monday’s price action indicates a potential bottom, confirmation is needed in the form of a decisive move above the day’s high of $95,900.
Traders usually wait for that chart-driven direction before hitting the market with new buy orders. Meanwhile, Monday’s low near $89,000 is now the level to beat for the bears.
Note that demand-supply dynamics of BTC continues to increase strongly. As Bitwise Head of Research – Europe Andre Dragosch directed to Xcorporate demand for BTC has already outstripped the supply of new coins this year.
Price volatility may rise again on the back of Wednesday’s US CPI report, which could influence expectations of a Fed rate cut.
“After Monday’s sharp decline, Bitcoin rebounded from a low of $89K, as traders awaited the US CPI report on January 15. Major altcoins followed suit, with many losing in the last 24 hours, Neal Wen, head of global business development at Kronos Research, told CoinDesk.
“Market watchers are now focusing on signs of stability to spot further downside or upside,” Wen added.
