Bitcoin faces the risk of dropping below its current range of $90,000–$110,000. CoinDesk has highlighted three factors that could contribute to this scenario.
These are:
- tightening fiat liquidity;
- delays by the Trump administration in establishing a national bitcoin reserve;
- weakening upward momentum, according to technical analysis.
Liquidity
Specifically, the cash balance in the U.S. Treasury’s general account has increased from $623 billion to $800 billion.
After the national debt ceiling reached $36 trillion in January, investors anticipated that the Treasury would reduce its balance as part of emergency measures to keep the government functioning. This could have boosted liquidity in the economy and markets.
“We’re looking at a scenario where key liquidity sources are drying up or being more tightly controlled. This could lead to a slowdown in economic activity, higher borrowing costs, and potentially a more challenging environment for risk assets, including crypto,” explained analyst Anndy Lian.
We’re looking at a scenario where key liquidity sources are drying up or being more tightly controlled. This could lead to a slowdown in economic activity, higher borrowing costs, and potentially a more challenging environment for risk assets, including crypto.
— Anndy Lian (@anndylian) February 5, 2025
Bitcoin Reserve
The publication described the Trump administration’s approach to fulfilling its campaign promise of creating a bitcoin reserve as “cautious.” This is a disappointing shift for investors who expected swift implementation of such an initiative.
Recently appointed head of the Digital Assets Market Task Force, President’s special advisor on AI and cryptocurrencies David Sacks, called the assessment of creating a bitcoin reserve a priority but provided no details.
“Wait, Trump said he would create a framework, not promised to ‘assess it’. Assess/study is what Washington does when it doesn’t intend to address an issue,” commented Jim Bianco, president and macro strategist at Bianco Research.
Technical Picture
The chart of the leading cryptocurrency shows a bearish divergence on the 14-week RSI. A similar situation was observed after reaching the ATH in 2021.
The signal will be invalidated if the indicator breaks through the downtrend line, the publication noted.
According to Standard Chartered, digital gold is expected to rise to $112,000–$130,000 in the next two months due to accelerated institutional inflows and a shift in sentiment towards risk acceptance.
Earlier, analyst and MN Trading founder Michaël van de Poppe predicted volatility and a new bitcoin high in February.