Bitcoin (BTC) continues to consolidate between the $90,000 and $100,000 range, having failed to maintain a breakthrough above the six-figure mark after a brief surge on December 5. This persistent range-bound movement is largely driven by two key factors that are limiting the cryptocurrency’s upside potential.
The first factor is the significant slowdown in liquidity entering the crypto market. Spot exchange-traded funds (ETFs) and other liquidity channels, which had previously provided strong bullish momentum, have seen a notable decrease in activity. According to data from 10x Research, the market liquidity impulse index, which tracks stablecoin minting, ETF inflows, and futures market activity, has dropped sharply from over $15 billion to just $7 billion in recent weeks. This decrease in liquidity has contributed to Bitcoin’s struggles in sustaining levels above $100,000.
Markus Thielen, founder of 10x Research, pointed out that the reduction in liquidity growth could explain Bitcoin’s inability to hold its gains. As liquidity levels diminish, Bitcoin’s price struggles to maintain upward momentum, and recent data indicates a bearish divergence between the liquidity index and BTC’s price.
The second factor is the recent stagnation in Nvidia’s (NVDA) stock performance. Known as a bellwether for AI and technology stocks, Nvidia has historically shown a positive correlation with Bitcoin, especially since both assets bottomed out in late 2022. However, since mid-November, Nvidia’s rally has faltered, and analysts at TheMarketEar note that Bitcoin’s post-election rise to $100,000 has largely mirrored Nvidia’s performance. Despite Bitcoin’s 130% rise this year, Nvidia’s stock has outpaced it with a 172% increase.
Nvidia’s slowing momentum could be a signal for broader market sentiment, and its stock is now showing signs of a potential bearish reversal, which could dampen risk appetite across the markets. A neutral sentiment has emerged, as indicated by the shifting put-call skew in Nvidia options, further suggesting a less optimistic outlook for risk assets.
In this environment of more subdued bullishness and normalized leverage in the crypto market, Bitcoin may still have the chance to revisit the $100,000 level. However, any sustainable breakout above that threshold will depend on a resurgence of liquidity inflows and a more positive risk sentiment, particularly regarding major tech stocks like Nvidia.
