‘Shooting Star’ Pattern at Bitcoin’s Record Highs Signals Caution: Godbole

Bitcoin (BTC) began 2024 with strong momentum, briefly crossing the six-figure mark and fueling optimistic forecasts for 2025, with some analysts predicting BTC could reach $185,000 or higher. However, recent price action suggests the bullish trajectory may face significant hurdles in the near term.

In December, Bitcoin surged to an all-time high above $108,000 but closed the month below $94,000, marking its first monthly loss since August. This price movement created a bearish candlestick pattern known as the “shooting star” on the monthly chart, signaling potential downward pressure ahead.

The shooting star pattern is characterized by a long upper wick, a small body, and little to no lower wick. In Bitcoin’s case, the upper wick was nearly four times the size of the body, reflecting a strong rejection from higher price levels as sellers gained control. This pattern often suggests a bearish reversal, particularly when it follows a sustained uptrend like Bitcoin’s rally from $70,000 to over $100,000.

According to the CMT Association’s Level III textbook, the psychology behind a shooting star indicates that buyers pushed prices higher early in the period, only for sellers to dominate and force a close near the opening price. For Bitcoin, a confirmation of this bearish reversal would occur if prices drop below the December low of $91,186.

Historically, similar candlestick patterns with extended upper wicks have signaled tops in previous bull markets, adding weight to the current cautionary signals.

From a macroeconomic perspective, the Federal Reserve’s hawkish stance, rising Treasury yields, and a strengthening U.S. dollar index (DXY) have compounded headwinds for risk assets, including Bitcoin. These factors suggest potential short-term challenges for BTC’s price momentum.

Despite the bearish signals, analysts remain optimistic about Bitcoin’s longer-term prospects. Many believe the Fed may pivot toward a more dovish stance in the coming months, potentially fueling renewed risk-on sentiment across financial markets.

“My prediction for 2025 is simple: higher. Nothing has fundamentally changed since Nov. 5,” said trader and analyst Alex Kruger on X. “February will likely be the best-performing month, with the recent Fed hawkishness still holding markets back in the short term. The Fed will swing back dovish sometime in Q1, with traders pricing in more rate cuts.”

While short-term volatility may persist, the broader outlook for Bitcoin remains bullish, provided key support levels hold and macroeconomic conditions shift favorably in the coming months.