Bitcoin and Ethereum Show Promise: Navigating Pre-Breakout Risks

Summary: Bitcoin and Ethereum are currently experiencing bullish trends, but they also face risks associated with potential liquidity runs before significant price movements. Traders should be cautious and consider market signals carefully, particularly regarding breakout levels and liquidation points.

Key Takeaways

Bitcoin recently broke through the $90k resistance level after a period of sideways movement.
A liquidity run could create temporary price fluctuations, potentially misleading traders before a genuine upward movement occurs.
Ethereum may follow a similar pattern, with key liquidity levels that traders should monitor.
Traders are advised to be patient and consider profit-taking strategies without rushing into new positions based solely on breakout indicators.

Here's why the Bitcoin path to $100k might not be straightforward

Current Market Analysis of Bitcoin

Bitcoin Liquidity

Source: CrypNuevo on X

Bitcoin [BTC] recently surpassed the significant $90k resistance following three weeks of stable pricing between the $85k and $90k range. However, decreasing whale balances raise concerns that this upward trajectory may encounter hurdles and delays.

Crypto analyst CrypNuevo, in a recent post on X, warned of a possible liquidity run that could affect Bitcoin's anticipated price increase. Essentially, a liquidity run is an initial, deceptive price movement designed to trap breakout traders.

In this scenario, if Bitcoin breaks above the local resistance of $94.5k, it could lead traders to believe that a genuine breakout is in progress. As a result, liquidation levels from newly opened long positions might be targeted, potentially dragging the price down below $84k. If this occurs, Bitcoin could then commence its genuine upward movement towards $100k.

Bitcoin Liquidation Heatmap

Source: CrypNuevo on X

Furthermore, there is a cautionary note that resistance at $92k, marked by the 50-day EMA, could impede Bitcoin's progress. If this resistance holds, the anticipated liquidity run to $96k may not materialize, leading Bitcoin to drop directly towards $80.6k in the near future.

Recently, AMBCrypto pointed out that a price move toward $94k-$96k appears possible this month, but there are also bearish trends related to ETF flows in the latter part of December that could complicate traders’ decisions.

A Look at Ethereum's Situation

Ethereum Liquidation Heatmap

Source: CoinGlass

Ethereum [ETH], another major cryptocurrency, seems poised for a similar potential outcome concerning its price movement. Traditionally, Ethereum mirrors Bitcoin’s trends, and the liquidation heatmap provides insights for swing traders for January.

Ethereum has gathered liquidity at around $3,200, with a strong magnetic zone identified at $3,500. There is also a notable liquidity cluster between $2,700 and $2,800. If Ethereum dips to these lower levels, it could act as a strong launchpad for its next price rally.

This insight means that traders of both Bitcoin and Ethereum who have not yet entered long positions should exercise caution and be patient. Those holding short-term profits might consider leveraging a shift in momentum on lower timeframes to secure their gains.

It's important to note that a Bitcoin breakout above $94.5k does not automatically indicate a buying signal. Traders should remain alert to the chance of a liquidity run occurring.

Conclusion

In summary, while both Bitcoin and Ethereum exhibit bullish trends, they also face significant pre-breakout risks that could lead to false price movements. Traders should approach the market with caution, remaining informed about potential liquidity runs and liquidation points as they strategize their positions.