The pressing question on crypto traders’ minds is: has the Bitcoin (BTC) price weakness run its course, or is there more to come?
The former appears to be the case since Monday’s price action, characterized by a rapid recovery from intraday lows, contrasted with mid-December, when the rally stalled and declined from higher record highs at $108,000.
BTC initially fell on Monday as investment banks lowered their expectations for a Fed rate cut, with some discussing the possibility of rate hikes following the strong Fed report. Friday’s employment, causing prices to fall below the lower end of the key $90,000-$93,000 support zone. American stock indices fell.
However, the breakdown of support was short-lived, and by the end of the day, BTC had returned to $94,000, leaving behind a classic “long-legged Doji candle”.
The long wick signifies an exhaustion of the downtrend, indicating that although sellers initially pushed prices down, buyers eventually overpowered them. This trend is often seen as a potential signal of a bottom, mainly when it occurs at key support levels or after a notable price decline, as is the case for BTC.
The long-legged doji emerged at the support zone (horizontal lines) which has systematically limited the decline since the end of November.
The reverse of the above is what we saw on December 16 when the bulls failed to hold prices at record highs above $108,000, printing a doji candle with a longer upper shadow . This was a sign that the uptrend was running out of steam, with sellers looking to reassert themselves.
And then?
Although Monday’s price action hints at a potential bottom, confirmation is needed in the form of a decisive move above the day’s high of $95,900.
Chart-based directional traders usually wait for this before entering the market with new buy orders. Meanwhile, Monday’s low near $89,000 is now the level for bears to beat.
Note that BTC supply-demand dynamics continue to be bullish. As Andre Dragosch, Head of Research at Bitwise – Europe pointed out on X, corporate demand for BTC has already outpaced the supply of new coins this year.
Price volatility could pick up again following Wednesday’s US CPI report, which could influence Fed rate cut expectations.
“After Monday’s sharp decline, Bitcoin has rebounded from a low of $89,000, as traders await the January 15 US CPI report. Major altcoins have followed suit, with many losing more over the past few 24 hours,” Neal Wen, Head of Global Affairs. development at Kronos Research, told CoinDesk.
“Market observers are now focusing on signs of stability to detect further declines or increases,” Wen added.
