These 3 Factors Could Prevent Bitcoin from Maintaining the $90K-$110K Range and Delay the Next Bullish Move.

Bitcoin Faces Uncertainty Amid Tightening Liquidity, Regulatory Delays, and Bearish Technicals

Since early 2023, Bitcoin (BTC) has been on a steady upward climb, marked by price increases followed by consolidation periods that set the stage for the next bullish movement. The current price range of $90,000 to $100,000 marks the third consolidation phase in the broader bull run that began at $20,000. While many expect this phase to eventually lead to a breakout, several factors suggest that Bitcoin’s upward momentum could be under pressure.

Liquidity Constrictions in the USD Market

A primary concern for Bitcoin’s short-term prospects is the tightening of U.S. dollar liquidity. As highlighted by Arthur Hayes, Chief Investment Officer at Maelstrom, any reduction in fiat liquidity—especially in the U.S. dollar—typically spells trouble for risk assets such as Bitcoin. Data shows that the U.S. Treasury General Account (TGA), the government’s checking account at the Federal Reserve, has seen a significant increase of $177 billion in just four weeks, raising the balance from $623 billion to $800 billion.

This surge in the TGA came after the U.S. hit its debt ceiling, which limited the government’s ability to inject liquidity into markets as it had done during past debt ceiling crises. Traders had expected the Treasury to run down this balance to improve market liquidity, as was done in early 2023. However, with liquidity tightening, Bitcoin’s price may face downward pressure, especially given the broader macroeconomic effects of reduced liquidity, such as higher borrowing costs and slower economic growth.

Trump Administration Delays Strategic BTC Reserve Plans

In addition to liquidity concerns, Bitcoin’s future price trajectory is being influenced by regulatory uncertainty. One of the key catalysts for Bitcoin’s rise from $70,000 to over $100,000 was the anticipation that the Trump administration would move forward with the creation of a strategic Bitcoin reserve. However, recent comments from White House officials have dampened those expectations. Rather than committing to immediate action, the administration has opted to “evaluate” the creation of the reserve, signaling a delay in this potentially game-changing initiative.

Many crypto enthusiasts and investors were hoping for quick action, but the decision to evaluate the reserve has led to frustration. According to Jim Bianco, President of Bianco Research, the term “evaluate” often suggests a lack of urgency and is typically used when Washington does not intend to follow through. The delay in these plans sent Bitcoin’s price down from over $100,000 to $96,000 in overnight trading, as markets reacted negatively to the uncertain timeline.

Technical Indicators Suggest a Possible Price Correction

On top of liquidity and regulatory concerns, technical analysis also raises red flags for Bitcoin. The 14-week relative strength index (RSI) has recently shown bearish divergence, mirroring the pattern seen at the 2021 price peak. This indicates that, despite rising prices, Bitcoin’s upward momentum may be losing strength. The RSI has produced a lower high compared to its December level, signaling a potential slowdown in bullish momentum.

If the RSI fails to break through its falling trendline, it could confirm the bearish divergence and point to a weakening market. However, if Bitcoin’s price breaks above the trendline, it could invalidate the bearish signal and signal a continuation of the bullish trend.

Conclusion: A Challenging Road Ahead for Bitcoin

Bitcoin’s consolidation in the $90,000 to $100,000 range has many expecting a breakout, but various factors point to potential challenges ahead. Tightening liquidity, delays in the strategic Bitcoin reserve initiative, and weakening technical indicators suggest that the cryptocurrency may face a period of consolidation or even a correction. Investors will need to stay alert to these developments, as Bitcoin’s next move will depend on how these factors play out in the coming weeks and months.

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