Bitcoin Price Movements: Bears Await Pause

Bitcoin Price Movements: Bears Await Pause - $104,000 Breakout Looms

In recent sessions, Bitcoin's price has risen by approximately 3%, but the price action presents mixed signals. While the overall market structure remains bullish, a pause appears imminent. This pause may disappoint bullish traders in the short term, but it could also create a pattern that sets the stage for a significant upward movement in the future.

Key Takeaways

Bitcoin's recent price rise indicates potential for a pause and consolidation.
A cup-and-handle formation can signal a larger upward movement.
On-chain metrics suggest buying is cautious but persistent among long-term holders.
Key price levels to watch are $89,450 and $93,560, with a breakout target near $104,000.

A possible cup-and-handle formation is emerging on the daily chart. If fully developed, Bitcoin’s next price action may focus more on structural evolution rather than swift movements.

Is Consolidation on the Horizon?

The recent price movement of Bitcoin exhibits a rounded bottom, forming the "cup" in this cup-and-handle pattern. This pattern typically develops when the price slowly recovers after a sell-off, stabilizes, and pauses before the next major breakout.

The latest daily candle closed in the green; however, it featured a long upper wick, which is notable. Long wicks indicate that sellers are active at higher price levels even when the price closes higher.

This often signifies the beginning of a consolidation period rather than a continuation of the upward trend. If consolidation occurs, it might also complete the handle formation.

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On-chain data lends support to the notion of this pause. The Hodler Net Position Change metric, which tracks whether long-term holders are buying or selling Bitcoin, indicates that buying activity has resumed, albeit cautiously. Since December 26, long-term holders have consistently added BTC to their positions. However, the buying peak on January 4 only reached 12,349 BTC, a stark drop of nearly 93% compared to the late November selling peak of approximately 185,451 BTC.

Essentially, long-term holders are purchasing Bitcoin again, but their actions lack urgency. This behavior suggests a handle formation rather than an immediate breakout.

The positioning of derivatives also points toward consolidation. According to the Binance BTC/USDT perpetual liquidation map, long liquidation leverage stands at around $2.24 billion, while short liquidation leverage is about $416 million. This indicates that long positions are approximately five times larger than short positions.

When long leverage is so heavily weighted, even minor price pullbacks can trigger liquidations. This risk alone may keep the price capped in the short term, aiding in the complete formation of the handle.

So, the essential question becomes: after this anticipated pause, what factors will drive Bitcoin's price higher?

Why the Bullish Outlook Persists Post-Pause

Despite the potential for price consolidation, underlying selling pressure appears to be diminishing.

One critical indicator is the exchange inflows, which measure how much Bitcoin is sent to exchanges, often for selling purposes. On December 31, total exchange inflows surged to about 43,940 BTC. However, by January 5, this figure dropped to around 3,970 BTC—a decline of over 90% in just a few days.

This drop is significant as Bitcoin's price has continued to rise during the same time frame. When the price increases while exchange inflows decrease, it suggests that traders are not eager to sell into the strength of the market.

Another encouraging sign comes from the Spent Coins Age Bands, which reflect the movement of coins of various ages on-chain. Higher values indicate increased coin spending, while lower values show that holders are maintaining their positions.

On December 31, activity involving spent coins was around 28,033 BTC, but by January 5, it had dropped to approximately 5,644 BTC, reflecting an 80% decrease in coin movement.

Both newer and older coins are experiencing less movement, indicating a reduction in selling pressure, even with crowded long positions in derivatives.

In summary, while leverage risks account for why Bitcoin may experience a pause, on-chain behavior hints that the broader trend continues to lean towards bullishness.

Key Price Levels to Watch

If Bitcoin's price consolidation holds true, the structure will become more significant than momentum.

As long as Bitcoin remains above $89,450, the overall bullish set-up will remain intact. Any significant drop below $84,320 could invalidate this pattern and reopen the potential for downside risks.

On the upside, the initial key level to monitor is $93,560, which is close to the neckline of the developing handle. Surpassing this level would bolster the bullish narrative. A decisive daily close above $94,710 would serve as a strong confirmation of the breakout.

From the neckline itself, the measured move from the cup suggests a Bitcoin price target near $104,000, about 12% higher. If momentum continues to build, $107,460 could emerge as the next resistance level.

In conclusion, Bitcoin may initially frustrate bullish traders with sideways movement. However, if this consolidation completes the handle formation, the subsequent breakout may be challenging for bearish traders to manage.