CoinDesk
Feb 5, 2025
7 0

Bitcoin Faces Potential Downturn Amid Three Critical Developments

Bitcoin (BTC) is currently consolidating between $90,000 and $100,000, following a bull run from $20,000. Analysts expect this phase to precede a breakout, but three developments suggest potential challenges.

Tightening USD liquidity

  • The U.S. Dollar (USD) liquidity is tightening, impacting all asset classes.
  • The Treasury General Account (TGA) balance increased from $623 billion to $800 billion in four weeks.
  • Markets anticipated liquidity enhancement through TGA reductions amid the debt ceiling, similar to early 2023 actions.
  • Experts warn that reduced liquidity may lead to economic slowdown and higher borrowing costs, affecting risk assets like crypto.

Trump administration to 'evaluate' strategic BTC reserve

  • The Trump administration plans to evaluate the feasibility of establishing a strategic BTC reserve.
  • This cautious approach contrasts with previous expectations for immediate action.
  • Following comments on the reserve evaluation, BTC prices dropped from over $100,000 to $96,000.

Reappearance of a 2021 topping pattern

  • The 14-week relative strength index (RSI) shows bearish divergence, indicating a potential slowdown in bullish momentum.
  • This pattern resembles the one observed at the 2021 market top.
  • A bullish trend would resume if the RSI crosses above the falling trendline.