Bitcoin’s $90K-$110K Range is at Risk, With Three Factors Potentially Delaying the Next Bull Market Surge.

Bitcoin’s Bullish Momentum Faces Multiple Roadblocks Amid Tightening Liquidity and Cautious Regulatory Stance

Bitcoin (BTC) has followed a classic bull market pattern since early 2023, with incremental price gains followed by consolidation phases that set the stage for further upward movement. The cryptocurrency has currently been consolidating between $90,000 and $100,000, marking the third phase of this bull cycle that began from the $20,000 level. Historically, these consolidations have been followed by a breakout, leading many to believe that another surge is imminent. However, several factors suggest that Bitcoin could face headwinds in its quest for a new high.

Decreasing USD Liquidity Poses a Risk

A significant concern for Bitcoin’s bullish momentum is the tightening of liquidity, particularly in U.S. dollars, which is seen as the global reserve currency. According to Arthur Hayes, Chief Investment Officer at Maelstrom, the tightening of USD liquidity could adversely affect assets like Bitcoin. Data shows that the U.S. Treasury’s General Account (TGA) has increased its balance by $177 billion in just one month, from $623 billion to $800 billion.

This increase comes after the U.S. government hit its $36 trillion debt limit, with market participants expecting the Treasury to release funds from the TGA as part of extraordinary measures to maintain government operations. In 2023, this helped increase market liquidity and boosted risk-taking in equities and crypto markets. However, with the TGA balance rising, liquidity appears to be drying up, making it harder for risk assets like Bitcoin to thrive.

According to blockchain expert Anddy Lian, a reduction in liquidity could lead to slower economic activity, higher borrowing costs, and a more difficult environment for risk-sensitive assets like Bitcoin.

Trump Administration’s Delayed Approach to Bitcoin Reserve

Another potential obstacle for Bitcoin’s continued bullish trajectory is the Trump administration’s cautious approach to establishing a strategic Bitcoin reserve. Following President Donald Trump’s rise to office, a proposed Bitcoin reserve was seen as a major catalyst for Bitcoin’s surge from $70,000 to over $100,000.

However, recent remarks from Trump’s crypto czar suggest a more cautious approach, with the administration opting to “evaluate” the feasibility of such a reserve. This shift has disappointed investors, who were expecting quicker action on this front. Jim Bianco, president of Bianco Research, noted that the term “evaluate” in Washington typically signals a lack of immediate action. Following the administration’s comments, Bitcoin experienced a drop in price from over $100,000 to $96,000, signaling that market participants had become wary of the delayed action.

Technical Indicators Show Bearish Divergence

On the technical side, Bitcoin’s price charts are also signaling caution. The 14-week relative strength index (RSI) has displayed a bearish divergence, which mirrors the pattern seen before Bitcoin’s 2021 price peak. The RSI has posted a lower high compared to its December high, suggesting weakening momentum despite continued price increases. This negative divergence points to a potential slowdown in the bullish trend.

If the RSI fails to break above the descending trendline, the bearish signal could be confirmed, signaling a potential reversal in Bitcoin’s upward momentum. However, a breakout above the trendline would invalidate this bearish scenario, potentially re-igniting the bullish sentiment in the market.

Conclusion: Bearish Sentiment Builds Amid Growing Challenges

In conclusion, Bitcoin’s current consolidation between $90,000 and $100,000 has raised hopes for another breakout. However, tightening liquidity, a delayed strategic Bitcoin reserve from the Trump administration, and technical bearish signals suggest that Bitcoin may face significant challenges in the near term. Investors and traders will need to remain vigilant in monitoring these factors to assess whether Bitcoin can maintain its upward momentum or if a correction is on the horizon.