Bitcoin experienced significant volatility during Inauguration Day, surging to an all-time high above $109,000 before retreating as President Donald Trump made no mention of cryptocurrency during his inaugural speech. Investors and traders are now closely monitoring Bitcoin’s chart for clues about future price movements, with both bearish signals and key support and resistance levels in focus.
Why Did Bitcoin Surge Before Dropping Post-Inauguration?
Bitcoin’s rise to $109,300 on Inauguration Day was fueled by optimism that President Trump, a vocal cryptocurrency supporter, might introduce pro-Bitcoin policies, such as reducing regulatory hurdles or establishing a federal Bitcoin reserve. However, the lack of direct mention of cryptocurrency in his speech led to a sell-off, bringing Bitcoin down to $102,800 at the time of writing.
Key Factors Driving Volatility:
- Pre-Inauguration Optimism: Hopes for crypto-friendly policies drove buying pressure ahead of the event.
- Bearish Market Reaction: The absence of pro-crypto announcements triggered a wave of profit-taking.
- Technical Patterns: Bearish candlestick formations and RSI divergence signaled potential downward pressure.
What Bearish Candlestick Patterns Signal a Reversal?
Bitcoin’s retreat formed two bearish candlestick patterns that suggest caution:
- Shooting Star: This pattern, formed after today’s high, warns of a potential reversal.
- Bearish Engulfing Pattern: This weekend’s candlestick pattern also hinted at further downside movement.
Additionally, a bearish divergence between Bitcoin’s price and the Relative Strength Index (RSI) indicates weakening momentum. While Bitcoin made a higher high, the RSI failed to do so, signaling a possible double top formation.
What Are the Key Support Levels for Bitcoin?
Bitcoin traders should watch these critical support levels during any potential retracement:
$92,000
This level aligns with Bitcoin’s early-November peak and several pullback troughs from late November to early January. A close below this could trigger a move lower.
$87,000
Located near the bottom of a pennant pattern from December, this level is a likely buying zone for investors.
$74,000
This level coincides with a multi-month horizontal line connecting peaks from March and October 2024. It is reinforced by the rising 200-day moving average, making it an attractive entry point for long-term investors.
What Are the Key Resistance Levels to Monitor?
If Bitcoin moves higher, two critical overhead resistance areas could influence its trajectory:
$106,000
Bitcoin has struggled to close decisively above this level since mid-December. Breaking past this area could pave the way for further gains.
$120,000
This level corresponds to a measured move price target. Calculated by adding the range depth ($14,000) to the breakout point ($106,000), it projects a bullish target of $120K.
What Does RSI Divergence Mean for Bitcoin’s Momentum?
The bearish RSI divergence indicates that momentum is weakening, even as Bitcoin hits higher highs. This divergence could signify a potential reversal or consolidation period, making it essential for investors to monitor RSI levels alongside price action.
FAQs
Why did Bitcoin drop after hitting $109,000?
The drop occurred due to profit-taking and the absence of pro-crypto announcements during President Trump’s inauguration.
What is the significance of $92,000 for Bitcoin?
This support level aligns with previous pullback troughs and could attract buyers if Bitcoin retraces further.
Should investors worry about the bearish candlestick patterns?
Bearish patterns like the shooting star and engulfing candlestick suggest caution, but key support levels may provide buying opportunities.
Can Bitcoin surpass $120,000 soon?
Bitcoin may face resistance near $120K, a key target based on the measured move price projection. A strong breakout above $106K is necessary first.
How does RSI divergence affect Bitcoin’s price?
RSI divergence signals weakening momentum, indicating a potential reversal or consolidation phase.
Is Bitcoin still in an uptrend despite the drop?
Yes, Bitcoin remains in a broader uptrend, but investors should watch support and resistance levels closely for confirmation.
What should long-term Bitcoin investors do?
Long-term investors may look to add positions near key support levels like $87,000 and $74,000 while avoiding over-leverage.
Are there any risks to watch out for in the current market?
Yes, risks include regulatory uncertainty, macroeconomic factors, and volatility driven by technical patterns like bearish divergence.
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