Bitcoin retreats near a milestone level on profit-taking

Bitcoin’s price has fallen sharply over the past 24 hours, down 3.6% to just above $94,000 (€89,000) at 5.30am CET. The retreat appears to be driven by profit-taking as the post-Trump rally stalled, lacking a fresh catalyst for bitcoin investors to propel the world’s largest cryptocurrency past the key physicological barrier of $100,000 (€95,400).

Bitcoin reached a fresh high of above $99,000 (€94,400) last Friday, a 46% rally since 5 November amid Trump’s win in the US election. Bitcoin surged before and after the US election, as markets expected that the Trump administration would adopt policies favourable to cryptocurrencies. The president-elect said he would make America a “crypto capital” in his campaign. 

Despite the decline, analysts believe that Bitcoin’s uptrend is not over.

“There is no doubt that reaching the $100,000 mark will be a significant psychology level for many and we may see some profit taking along the way,” Josh Gilbert, a market analyst at eToro Australia, wrote in a note to clients on Friday. 

Bitcoin has gained 122% year-to-date, buoyed by the approval of spot Bitcoin ETF by the US Securities and Exchange Commission (SEC) in February and a Bitcoin halving event in April. Meanwhile, central banks’ rate cuts and relaxation in liquidities provided a macro tailwind to cryptocurrencies this year. 

Significant liquidation

The cryptocurrency markets often see huge volatility due to a lack of fundamental base for valuations. “The price action in BTC is indicating bubble behaviour – a departure from any known valuation method,” said Michael McCarthy, market strategist and CCO at Moomoo Australia. 

The digital tokens’ price movements purely depend on speculative trades on technical analysis on charts. Meanwhile, increasing institutional adoption of Bitcoin assets become a primary driver of market volatility.

The market trends are often shaped by sentimental trading behaviour and liquidation volumes. Hence, large trades by major holders, or “whales”, can significantly impact prices, especially on smaller exchanges or during periods of lower trading activity.

According to CoinShares data, the United States-based spot Bitcoin exchange-traded funds (ETFs) saw a record weekly inflow of $3.38bn (€3.22bn) between 18 and 22 November, more than doubling the previous week’s figure. On Friday, Bitcoin price surged to a new record of above $99,500 (€94,900) but faded swiftly near the $100,000 threshold. 

According to Coinglass data, a more than $500m (€477m) liquidation was recorded in crypto-tracked futures following Bitcoin’s price correction on Sunday. In the Asian session on Tuesday, Bitcoin experienced further large liquidation of more than $144m (€137m), suggesting more volatilities ahead. 

A bullish Bitcoin cycle

Technical analysis indicates that Bitcoin’s charts emerged with overbought signals, likely to lead to further correction. Some analysts expect the drawback will take it to $80,000 (€76,300) before consolidating for another possible bullish trend. However, markets will need fresh catalysts to drive beyound the $100,000 mark. 

“Despite closing in on that landmark figure, it still feels like we’re reasonably early in this bull market if we look at past market cycles,” Gilbert added. 

Bitcoin has reached fresh highs every four years in the past two bullish cycles since 2017. Each cycle experienced a surge of more than tenfold before a setback of between 70% and 80%.

Bitcoin has surged approximately 560% since its low two years ago, suggesting there might be more room for growth if history repeats.