Bitcoin (BTC) is currently facing hurdles that may prevent it from maintaining its recent price range between $90,000 and $110,000.
Factors such as tightening fiat liquidity conditions, a cautious policy from the Trump administration regarding a potential Bitcoin reserve, and technical indicators hinting at a possible decline in bullish momentum are contributing to this uncertainty.
Key Market Developments
By Omkar Godbole | Edited by Parikshit Mishra
Since the start of 2023, Bitcoin has enjoyed a steady stair-step upward trajectory, characterized by incremental price gains followed by consolidation phases.
Presently, it is oscillating between $90,000 and $100,000—an impressive recovery from a previous low of $20,000.
Many experts speculate this consolidation could lead to a bullish breakout, similar to the upswings observed in 2023 and the mid-2024 periods.
However, three significant developments suggest that the road ahead may be rockier than anticipated.
Decreasing USD Liquidity
A concerning trend is the tightening of liquidity in the U.S. Dollar, impacting various asset classes, particularly cryptocurrencies.
Arthur Hayes, the chief investment officer at Maelstrom, noted that the contraction in dollar liquidity stems from multiple economic factors.
For instance, the Treasury General Account (TGA)—the federal government’s key account at the Federal Reserve—has seen its cash balance surge from $623 billion to $800 billion in just one month, as per MacroMicro data.
When the U.S. hit its self-imposed debt ceiling of $36 trillion last month, there was hope that the Treasury would deploy extraordinary measures to reduce the TGA balance, thereby increasing overall liquidity, akin to strategies used during the early 2023 debt ceiling crisis.
Such actions previously expanded the risk appetite in both the equity and cryptocurrency markets.
Economic commentator Anddy Lian further noted that significant sources of liquidity appear to be dwindling or becoming more tightly regulated, a shift that could lead to decreased economic activity, elevated borrowing costs, and a tougher environment for risk assets, like Bitcoin.
Administration’s Cautious Stance on BTC Reserve
Since taking office on January 20, President Donald Trump has prioritized various campaign commitments surrounding tariffs and international relations.
However, a notable shift has surfaced regarding the proposed establishment of a strategic Bitcoin reserve—an initiative that previously played a crucial role in driving Bitcoin’s rise from $70,000 to above $100,000.
Now, the administration seems more hesitant, taking a measured approach to assess this potential initiative, leaving Bitcoin enthusiasts disheartened as they wait for significant progress.
Analysts, including Jim Bianco from Bianco Research, have voiced worries that such cautious language indicates a lack of genuine intent to follow through with these plans.
After the cryptocurrency Czar from the administration announced an assessment of the reserve’s feasibility, Bitcoin’s price swiftly fell from over $100,000 to $96,000 in overnight trading.
Technical Indicators Show Caution
For those who depend on technical analysis to gauge price movements, the recent behavior of the 14-week relative strength index (RSI) demands attention.
This indicator displays signs of bearish divergence, akin to patterns noted during the peak of the 2021 bull market.
This divergence suggests a weaker bullish momentum, evident despite rising prices, as it marks a lower high compared to earlier peaks in December.
If the RSI manages to breach a declining trendline, it could signal a potential resurgence in upward momentum, making it essential for market observers to stay vigilant.
Source: Coindesk
