Bitcoin Bullish Momentum – Tightening Liquidity and Trump’s Bitcoin Reserve Delay
Bitcoin Bullish Momentum– Since early 2023, Bitcoin (BTC) has experienced a classic ‘stair-step’ bull market. Prices have steadily risen, followed by consolidation periods that set the stage for the next surge. Currently, Bitcoin is consolidating between $90,000 and $100,000, marking the third phase of the broad bull market that began at the $20,000 level. Many anticipate another breakout following this consolidation. However, several key factors suggest Bitcoin’s future may not be as strong as expected.
At present, Bitcoin’s consolidation between $90,000 and $100,000 is considered the third stage of the broad bull market that started at $20,000. This phase signifies a period where Bitcoin has sustained a long-term uptrend but has begun to stabilize. Investors and analysts, looking at historical trends, expect Bitcoin to experience another major surge after this consolidation phase. In such bull markets, consolidation following a strong rally is often seen as a preparatory stage for a new price breakout.
1. Tightening U.S. Dollar Liquidity: A Major Concern for Bitcoin
One of the primary factors affecting Bitcoin’s momentum is the tightening of U.S. dollar (USD) liquidity. According to Arthur Hayes, Chief Investment Officer at Maelstrom, the U.S. government has increased its cash balance in the Treasury General Account (TGA) from $623 billion to $800 billion in just four weeks. The TGA is the U.S. government’s checking account at the Federal Reserve, and this increase indicates that liquidity in the broader economy is tightening.
This shift is a concern for BTC investors, as a reduction in liquidity generally leads to higher borrowing costs and can slow down economic activity. Anddy Lian, an expert in blockchain and intergovernmental relations, noted that tighter liquidity could create a more challenging environment for risk assets, including Bitcoin. As Lian explained, “key liquidity sources are drying up or being more tightly controlled, which could lead to a slowdown in economic activity.”
2. Trump Administration’s Delay in Evaluating a Strategic Bitcoin Reserve
Another factor weighing on Bitcoin’s future price movement is the delay in the Trump administration’s plans for a strategic Bitcoin reserve. This initiative was originally a major catalyst for Bitcoin’s price surge from $70,000 to over $100,000. However, the Trump administration has now shifted its stance, opting to “evaluate” the feasibility of such a reserve rather than taking immediate action.
Jim Bianco, President and Macro Strategist at Bianco Research, expressed disappointment with this delay, stating, “Evaluate/Study is what Washington does when they don’t want to do something.” The announcement caused a decline in Bitcoin’s price, as BTC dropped from over $100,000 to $96,000 following this news. Investors who had expected swift action may find this cautious approach frustrating.
3. Technical Indicators Point to Slowing Momentum
For those analyzing Bitcoin’s price through technical charts, there’s another red flag: the reappearance of a bearish divergence in the 14-week Relative Strength Index (RSI). This technical indicator is diverging bearishly, a pattern that closely resembles the setup seen before Bitcoin’s price peaked in 2021.
The RSI has formed a lower high relative to its December high, signaling a slowdown in bullish momentum. This divergence suggests that the bullish trend may be losing steam, though it could be invalidated if the RSI breaks above the falling trendline, signaling a potential reversal.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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