Bitcoin (BTC) has been experiencing price action that contrasts sharply with the exhaustion of its uptrend in mid-December when it briefly surged above $108,000. Traders are now asking: Has Bitcoin reached its bottom, or is more downside still ahead?
The signs appear to lean toward a potential bottom, as Monday’s price action showcased a strong recovery from intraday lows. This is in stark contrast to mid-December when the rally faltered and prices reversed after hitting the $108,000 level.
On Monday, Bitcoin initially dipped as investment banks adjusted their expectations for Federal Reserve rate cuts. With the release of strong U.S. jobs data from Friday, some analysts speculated that the Fed may even consider rate hikes, causing Bitcoin’s price to drop below the $90,000-$93,000 support range, mirroring the pullback in major U.S. stock indices.
However, the breakdown of this support zone was brief. By the end of the day, Bitcoin surged back to $94,000, forming a “long-legged Doji” candlestick pattern. This type of candlestick, characterized by a long wick, suggests that while sellers initially drove prices lower, buyers eventually took control, signaling a potential market bottom. This pattern is commonly seen as a signal of downtrend exhaustion, particularly when it occurs after a significant price drop or at key support levels.
The appearance of the long-legged Doji at the support zone that has consistently held since late November indicates strong buying pressure at this level. In contrast, on December 16, Bitcoin printed a Doji with a longer upper shadow at the $108,000 highs, signaling that the uptrend was running out of steam and that sellers were beginning to assert themselves.
What’s next for Bitcoin?
While Monday’s price action suggests the potential for a bottom, confirmation is still needed. A decisive move above the $95,900 high from Monday would suggest that bullish momentum is gaining strength, prompting traders to enter new long positions. Meanwhile, the $89,000 low established on Monday is now the key level for the bears to break.
Bitcoin’s demand-supply dynamics remain positive, with corporate demand for BTC outpacing the supply of new coins, as noted by Andre Dragosch, Head of Research for Europe at Bitwise. This indicates that the market’s bullish outlook is supported by strong institutional interest.
The release of Wednesday’s U.S. Consumer Price Index (CPI) report could introduce more volatility, influencing expectations for future Fed rate cuts and potentially providing direction for Bitcoin’s next move.
“After Monday’s sharp drop, Bitcoin rebounded from a low of $89K, as traders await the U.S. CPI report on January 15. Several major altcoins followed Bitcoin’s move, with some seeing even larger losses over the last 24 hours,” said Neal Wen, Head of Global Business Development at Kronos Research. “Traders are now looking for signs of stability to determine whether Bitcoin will continue its downturn or begin a new rally,” Wen added.
