The pressing question on cryptocurrency traders’ minds is: Has Bitcoin (BTC) price weakness run its course or is there more to come?
The former appears to be the case, as Monday’s price action, characterized by a rapid recovery from intraday lows, contrasted with that of mid-December, when the rally stalled and fell from all-time highs above $108,000.
On Monday, BTC initially fell as investment banks lowered expectations for Fed rate cuts, with some discussing the potential for rate hikes following Friday’s excellent jobs report, causing prices to fall below the lower end of the key support zone of $90,000-$93,000 as main US stock indices gapped lower.
However, the break of support was short-lived and by the end of the day, BTC had risen back to $94,000, leaving behind a classic “long-legged Doji candle.”
The long wick signifies the exhaustion of the downtrend, indicating that although sellers initially pushed prices down, buyers eventually overpowered them. This pattern is often seen as a potential signal of a bottom, mainly when it occurs at key support levels or after a notable price drop, as is the case with BTC.
The long-legged doji has emerged in the support zone (horizontal lines) that has consistently restricted the decline since late November.
The opposite of the above is what we saw on December 16, when the bulls failed to hold prices at all-time highs above $108,000, printing a doji candle with a longer upper shadow. This was a sign that the uptrend was losing steam and sellers were looking to reassert themselves.
What’s next?
While Monday’s price action hints at a possible bottom, confirmation is required in the form of a decisive move above the day’s high of $95,900.
Chart-based directional traders typically wait for that before hitting the market with new buy orders. Meanwhile, Monday’s low near $89,000 is now the level to beat for bears.
Note that BTC supply and demand dynamics continue to lean bullish. As Bitwise Head of Research – Europe Andre Dragosch noted in X, corporate demand for BTC has already exceeded the supply of new coins this year.
Price volatility may pick up again following Wednesday’s US CPI report, which could weigh on Fed rate cut expectations.
“After Monday’s sharp drop, Bitcoin rebounded from a low of $89,000, as traders await the US CPI report on January 15. Major altcoins followed suit, with many losing more in recent 24 hours,” Neal Wen, global business director. development at Kronos Research, he told CoinDesk.
“Market watchers are now focusing on stability signals to see more upside or downside,” Wen added.
