On Tuesday, January 14, Bitcoin is trading above $96,000. The leading cryptocurrency has bounced back from a flash crash that saw it dip below $90,000 and faced macroeconomic challenges last week. Significant profit-taking could drive BTC down to the support areas on the weekly chart, approaching the $70,000 mark.

Key Influencers on Bitcoin and the Trump Impact

The inauguration of President-elect Donald Trump on January 20 is a pivotal event that traders are closely monitoring. Trump has significant influence over the cryptocurrency space, especially with his pro-crypto appointments for roles such as the Securities and Exchange Commission Chair and AI & Crypto Czar, along with the anticipation of favorable crypto regulations.

The price trend of Bitcoin has become increasingly connected with macroeconomic shifts in the U.S. in recent weeks. BTC and cryptocurrencies are considered highly liquid risk assets, making their prices sensitive to broader economic updates.

Bitcoin opened the day lower, just above $94,000, but rebounded to a high of $97,371 during today’s trading session.

Bitcoin
BTC/USDT daily price chart | Source: Crypto.news

Trump has made his expectations clear regarding the Federal Reserve and has promised the establishment of a Strategic Bitcoin Reserve for the U.S. Crypto traders are wary, as the central bank operates independently, and the new President’s influence on its decisions could be minimal.

Senator Cynthia Lummis’s proposed Bitcoin Act aims to create a Strategic Bitcoin Reserve in the U.S., utilizing dollar-denominated debt to purchase 1,000,000 BTC, nearly 5% of Bitcoin’s total fully diluted supply, within the next five years.

As the inauguration approaches, traders are keenly observing how the “Trump effect” might shape Bitcoin’s price movements.

At 10X Research, Bitcoin analysts are adopting a cautious outlook leading up to Trump’s inauguration. They note that market drivers appear weak, suggesting Bitcoin may remain in a trading range until mid-March.

As the post-election excitement subsides, it’s noteworthy that the crypto industry, which contributed $238 million in the last election cycle, helped to elect 298 lawmakers supportive of crypto in Congress. Whether this relationship is mutually beneficial and capable of influencing Bitcoin’s price over time remains to be seen.

Decreased Institutional Interest in Bitcoin Leads to Lower Sentiment

Research from AmberData regarding Bitcoin ETF trends indicates that institutional investors have significantly reduced their inflows to U.S.-based Spot Bitcoin ETFs, likely pausing new investments in light of the recent price downturn. This suggests a risk-averse strategy among institutional players.

Bitcoin traders’ short-term caution may soon turn into renewed confidence as BTC aims for the critical $100,000 threshold. Should Bitcoin maintain stability above $95,000, it could significantly influence future inflows to Spot Bitcoin ETFs.

Evidence suggests that continued inflows from significant market players like BlackRock would indicate a regaining of confidence, whereas persistent outflows from firms like 21Shares or Franklin Templeton could solidify a risk-off sentiment. It is crucial for traders to keep a close watch on ETF allocations to better forecast Bitcoin price movements and determine whether the asset will consolidate or reach new levels in the coming weeks.

Bitcoin ETF dynamics
Bitcoin ETF flow dynamics | Source: AmberData Research

Swissblock insights reveal a decline in BTC sentiment during the first half of January. As Bitcoin dipped to the $90,000 low, it raised concerns among traders, driving the fear and greed index downwards.

Bitcoin Fear & Greed index
Fear & Greed Index (Weekly average) | Source: Swissblock

Analysis of Bitcoin On-Chain and Derivatives Data

Data from Coinglass shows an increase in open interest and options trading volume over the past 24 hours. As derivatives traders position themselves for potential gains ahead of Trump’s inauguration, any sudden price fluctuations in BTC could trigger a wave of long liquidations, adversely affecting their portfolios.

Bitcoin derivatives data analysis
Bitcoin derivatives data analysis | Source: Coinglass

The current optimistic sentiment among derivatives traders, as reflected in the long/short ratio (above 1) on platforms like Binance and OKX, can be linked to expectations of a pro-crypto Trump administration.

According to the Bitcoin log chart and the Market Value to Realized Value (MVRV) ratio from 10X Research, the cryptocurrency is approaching levels historically associated with profit-taking by institutional investors and large wallet holders. The MVRV ratio has reached 2.7x, which often triggers profit-taking behavior among Bitcoin holders, as seen in past instances.

Historically, when the MVRV ratio ascends to 4x or 6x, it signals the onset of significant price corrections in Bitcoin.

Bitcoin log chart vs. MVRV ratio
Bitcoin log chart vs. MVRV ratio | Source: 10Xresearch

By combining on-chain analysis with the anticipated hawkish stance of the U.S. central bank in the coming months, the likelihood of Bitcoin testing support levels at $76,000 and potentially dipping below $69,000 rises.

The Network Realized Profit/Loss metric from Santiment aligns with the declining Bitcoin sentiment and the MVRV ratio. Prolonged periods of profit-taking are typically related to downward corrections in Bitcoin prices.

Bitcoin price
Bitcoin price vs. Network realized profit/loss | Source: Santiment

Keith Alan, co-founder of Material Indicators, cautioned crypto traders in a tweet on X about the possibility of Bitcoin revisiting its 2021 all-time high of $69,000. Alan identifies $86,000 as a critical support level, with $76,000 serving as a secondary support.

If Bitcoin experiences a sharp correction and fails to rebound from these support levels, it could fall below $70,000.

Sergei Gorev, head of risk at YouHodler, shared insights with Crypto.news in an exclusive interview:

“Cryptocurrency prices are reflecting negative trends amid the declining trading volumes, leaving traders uncertain about the medium-term direction. Rapid changes are taking place.

BTC has broken through the resistance level of $92,000, which may signal a drop towards $73,000, where robust support from the 200 SMA is currently positioned.”

Matteo Bottacini and the Crypto Finance team have observed Bitcoin’s rapid rebound from its dip below $90,000. The first significant resistance point for an upward trajectory is $96,800, and Bitcoin is consistently holding above the $92,000 support.

Technical Insights and Bitcoin Price Predictions

Bitcoin is presently stabilizing around the $96,600 mark. The daily BTC/USDT price chart highlights the formation of two imbalance zones serving as support levels for Bitcoin. The first zone lies between $81,500 and $85,072, and the second falls between $76,900 and $80,216.

The $70,000 support level becomes critical if Bitcoin fails to rally from these two support zones and continues to decline.

A potential 27% drop from the current price could lead to Bitcoin testing the $70,000 support, potentially erasing all gains made since November 5, 2024, thereby negating the post-election rally.

The Moving Average Convergence Divergence (MACD) indicator shows negative momentum, with red histogram bars appearing below the neutral line. The Relative Strength Index (RSI) is currently at 51, close to the neutral threshold of 50.

Bitcoin price chart
BTC/USDT daily price chart | Source: Crypto.news

Disclosure: This article is not investment advice. The content and information presented here is for educational purposes only.