On Tuesday, January 14, Bitcoin is trading above $96,000. The leading cryptocurrency has bounced back from a sharp decline below $90,000 and recent macroeconomic challenges. Significant profit-taking activities could drive BTC towards the support levels observed on the weekly chart, nearing the $70,000 mark.
Influencers in the Bitcoin Market and the Trump Effect
The inauguration of President-elect Donald Trump on January 20 is an event that traders are closely monitoring. Trump has a significant presence in the crypto space, especially with his crypto-friendly selections for SEC Chair, AI & Crypto Czar, and anticipated pro-crypto regulations.
The price trend of Bitcoin has recently become closely linked with U.S. macroeconomic developments. BTC and cryptocurrencies are among the most liquid risk assets, thus their prices are heavily impacted by macroeconomic reports.
Bitcoin experienced a slight decrease at the beginning of the day, opening just above $94,000, but successfully recovered, peaking at $97,371 during today’s trading session.
The President-elect has articulated his expectations from the Federal Reserve, along with a proposed creation of a Strategic Bitcoin reserve for the United States. There are concerns among crypto traders since the Federal Reserve operates independently, which means the incoming President will not influence its decisions.
Senator Cynthia Lummis has introduced the Bitcoin Act, which would set up a Strategic Bitcoin Reserve in the U.S., using dollar-denominated debt to purchase 1,000,000 BTC — just under 5% of the total diluted supply of Bitcoin over the next five years.
Traders are tuning into the anticipated “Trump effect” on Bitcoin’s pricing as the inauguration approaches next week.
Analysts at 10X Research remain vigilant as Trump’s administration approaches. They note that the market forces appear weak, forecasting that Bitcoin may oscillate within a range until mid-March.
Despite the conclusion of the post-election euphoria, the cryptocurrency sector that contributed $238 million in the last election cycle has managed to secure 298 legislators in Congress who are pro-crypto. It remains uncertain whether this relationship will continue and if it could sway Bitcoin’s price long-term.
Institutional Interest in Bitcoin Declines, Sentiment Weakens
Research from AmberData regarding Bitcoin ETF trends indicates that institutions have significantly reduced their inflows into U.S.-based Spot Bitcoin ETFs and may be halting new allocations following the recent price downturn. This action indicates a risk-averse stance among institutional investors.
A cautious stance from Bitcoin traders in the short term could be replaced with renewed confidence as BTC moves closer to the $100,000 milestone. As Bitcoin stabilizes above $95,000, this critical level could influence the next round of inflows into Spot Bitcoin ETFs.
Findings suggest that sustained investments from major entities like BlackRock could restore confidence, while persistent outflows from firms such as 21Shares or Franklin Templeton may bolster a risk-averse narrative. Observing ETF allocations meticulously will be crucial for traders to anticipate Bitcoin price movements, helping to assess whether it consolidates or tests new price ranges in upcoming weeks.
Data from Swissblock insights illustrates the decline in BTC sentiment during the initial two weeks of January. As Bitcoin dipped to a low of $90,000, it raised concern among traders, leading to a lower fear and greed index.
Analysis of Bitcoin On-Chain and Derivatives Data
According to Coinglass data, open interest and options trading volume have surged in the past 24 hours. As derivatives traders align their positions for a potential upward trend leading up to Trump’s inauguration, sudden fluctuations in BTC prices could provoke a wave of long liquidations, leaving traders vulnerable to negative repercussions in their portfolios.
The present optimism amongst derivatives traders, highlighted by a long/short ratio exceeding 1 on platforms such as Binance and OKX, can be ascribed to expectations of a crypto-supportive Trump administration.
Analysis from 10X Research highlights that the Bitcoin log chart and the Market Value to Realized Value (MVRV) ratio indicate the token is nearing levels typically associated with profit-taking from “smart money,” denoting large wallet investors and institutions. The MVRV ratio has hit 2.7x, usually prompting profit-taking actions among BTC holders, as seen in previous occasions.
Historically, when the MVRV ratio climbs to 4x or 6x, it signals the start of a significant correction in Bitcoin’s price.
When combining on-chain analysis with an anticipated hawkish approach by the U.S. central bank over the coming months, there is a significant likelihood of Bitcoin testing support levels at $76,000 and potentially $69,000, dipping below the $70,000 threshold.
The Network Realized Profit/Loss metric from Santiment aligns with the MVRV ratio and the deteriorating sentiment among traders. Sustained spikes in profit-taking over extended periods are commonly linked with price corrections in Bitcoin.
In a recent tweet, Keith Alan, co-founder of Material Indicators, cautioned crypto traders about a possible drop to Bitcoin’s all-time high of $69,000 from 2021. He identified $86,000 as a significant support level and noted $76,000 as the secondary support.
If Bitcoin experiences a drastic correction and fails to recover from these support levels, it could fall below the $70,000 threshold.
Sergei Gorev, head of risk at YouHodler, shared insights with Crypto.news during an exclusive interview:
“Cryptocurrency prices are now showing negative trends amidst the continuing decline in trading volumes, as traders remain uncertain about the medium-term path forward. The market is shifting rapidly.
BTC prices have surpassed the resistance level of $92,000, which may subsequently prompt a drop to $73,000, where there is robust support from the 200 SMA.”
Matteo Bottacini and the team at Crypto Finance highlight Bitcoin’s swift recovery from its dip below $90,000. The primary inflection point for ascending to a higher range is positioned at $96,800, with BTC maintaining stability above the support level at $92,000.
Technical Analysis and Bitcoin Price Outlook
Currently, Bitcoin is consolidating around the level of $96,600. The BTC/USDT daily chart demonstrates the development of two imbalance zones, serving as support areas for Bitcoin. The first zone is located between $81,500 and $85,072, while the second ranges from $76,900 to $80,216.
The $70,000 level stands as a pivotal support threshold for Bitcoin, becoming critical if BTC fails to rebound from the two support zones and continues its downtrend.
A 27% decline from the present price could push Bitcoin to test the $70,000 support level, effectively nullifying all gains made since November 5, 2024, meaning the post-election BTC rally would be entirely erased.
The Moving Average Convergence Divergence (MACD) indicator reveals red histogram bars below the neutral line, indicating a negative momentum within the Bitcoin price trend. The Relative Strength Index (RSI) measures at 51, nearing the neutral point of 50.
Disclosure: This article does not constitute investment advice. The content and materials displayed on this page are intended solely for educational purposes.
