Bitcoin (BTC), a digital currency, registered an impressive recovery last week. It soared from the $90k price range to $109,357.07 – a new record. However, a new Bitfinex Alpha report warns that BTC’s upward momentum faces potential headwinds, as “sell-the-news”The trading behaviour is important.
Bitcoin’s rebound followed a steep decline to $89,698, which triggered $818 million in liquidations on Jan. 13. The majority of this amount, $592,000,000 was attributable to long positions.
Despite the scale of the pullback, Bitcoin’s ability to hold above key support levels highlights the ongoing strength of its price trends relative to traditional markets.
The behavior of wallets that have held BTC less than 155 day is a crucial level in determining the support and resistance for Bitcoin. The short-term holder realized price (STHRP) is currently $88,400. This metric, which determines market stability, has become a key determinant.
During last week’s correction, Bitcoin’s price found support near this level, preventing further downward pressure. In the past, holders of short-term assets have used their cost basis to protect themselves from further losses.
Additionally, the report said that President Donald Trump’s inauguration could potentially be a “sell-the-news” event. The anticipation of possible executive orders in favor of crypto taxation or regulation may cause traders to take profits ahead the event. This could lead to a short-term correction.
The report also highlighted the delicate balance in Bitcoin’s current market structure. The crypto has been boosted by aggressive spot-demand, but if the market cannot maintain its upward momentum, it could be at risk of breaching key support levels. This would lead to additional pressure from sellers.
The spot market is a place where institutions hold the line.
As evidenced by the aggressive increase in Spot Cumulative Volume Delta, (CVD), recent recoveries were primarily driven by activity on spot markets. This indicator, which measures the difference in market orders between buy and sell, shows strong demand from buyers.
A significant portion of these purchases originated in US-based exchanges. This is similar to patterns observed during the institutional buying by MicroStrategy, and other activity related exchange-traded fund (ETF) transactions.
The dominance of spot market buyers, particularly from institutional and short-term holders, pointed to Bitcoin’s position as one of the best-performing risk assets since the US election results in November.
The report warned that strong buying can often lead to bids being depleted, which could create a pullback situation.
Bull market ranges can be maintained
Bitcoin’s price is currently trading at approximately 18% higher than the STHRP cost-basis. But the report suggests maintaining momentum to prevent near-term stresses.
Short-term investors could panic if Bitcoin drops below $88,400, causing a sell-off across the market. This is especially true for altcoins.
In the broader context, Bitcoin’s ability to recover will depend on the interplay between institutional buying, spot market activity, and macroeconomic events.
The overall market outlook remains cautiously positive due to the consistent demand of both institutional and retail players.
The report added that Bitcoin’s resilience offers hope but advised traders to remain vigilant as the market navigates a potentially volatile period.
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