Bitcoin Below $100,000: Is The Market Preparing For A New Bull Run In February?

(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Rania Gule, Senior Market Analyst at XS - MENA.

Bitcoin has declined significantly and is now trading near $93,900, despite massive inflows into Bitcoin ETFs, which could soon drive increased institutional interest and reinforce the bullish momentum after the current correction. These ETFs attracted $5 billion in inflows in January alone, setting them on track for annual inflows exceeding $50 billion-far surpassing initial estimates of $15 billion at their 2024 launch. This surge is largely attributed to major players like BlackRock and Fidelity, which have led capital inflows, signalling strong institutional demand for Bitcoin as a strategic investment asset.

Despite expected monthly volatility, the broader trend suggests continued capital inflows into Bitcoin, especially as wealth managers and major institutions expand their market participation. Historically, gold ETFs experienced similar early-year inflows before seeing exponential growth in subsequent years. As Bitcoin gains recognition as a long-term investment asset, demand may continue rising, potentially driving prices to new record highs in the medium to long term.

From my perspective, this dynamic highlights Bitcoin's resilience in absorbing selling pressure and reacting positively to key technical levels, indicating strong investor demand. However, the key question remains: Can Bitcoin sustain this momentum in February, which has historically been one of the best-performing months for the cryptocurrency?

One factor that has impacted Bitcoin recently is the sharp decline in Nvidia's stock, triggered by the rise of China's DeepSeek, which offers more cost-efficient AI solutions and challenges U.S. dominance in the sector. Nvidia's 17% drop negatively affected the Nasdaq, which fell 3%, while Bitcoin lost only 2.6%. This suggests Bitcoin is becoming increasingly correlated with traditional markets while maintaining greater resilience than tech stocks. This new correlation implies that Bitcoin could be more influenced by broader economic shifts, necessitating close monitoring of developments in the technology and AI sectors.

The recent Bitcoin correction, which saw it drop below $100,000, also led to widespread market liquidations, with approximately $260 million in Bitcoin positions liquidated in a single day. In my view, such large-scale liquidations reflect high leverage among traders, increasing the risk of sharp volatility. However, Bitcoin's ability to reclaim key technical levels suggests market resilience and the potential for a continued uptrend if technical support remains strong.

Additionally, negative signals emerged from the Chicago Mercantile Exchange (CME), where Bitcoin futures turned negative for the first time since August 2023, alongside a decline in open interest. This drop in open interest indicates institutional hesitation in opening new positions, which could dampen short-term bullish momentum. On the other hand, this could present an opportunity for re-accumulation before the next rally, especially if market sentiment improves.

U.S. monetary policy has provided moderate support for Bitcoin, as the Federal Reserve kept interest rates unchanged but maintained a relatively hawkish stance due to persistent inflation concerns. This policy stance could create a supportive environment for Bitcoin in the medium term, as any economic slowdown may prompt the Fed to cut rates later this year-potentially boosting digital assets as an alternative hedge. However, rising bond yields and the continued strength of the U.S. dollar may limit Bitcoin's near-term gains, keeping the market volatile.

From my perspective, Glassnode data suggests that Bitcoin's current cycle closely resembles the 2015-2018 cycle, with the market showing increasing maturity alongside a slowdown in cyclical growth. Furthermore, Bitcoin balances on centralized exchanges have dropped to 2.7 million BTC, which I interpret as a shift in asset ownership towards ETFs rather than a true supply shock. This indicates that capital movement between long-term holders and speculators is the primary market driver, reinforcing the likelihood of a sustained uptrend as new buyers enter the market.

Looking ahead to February, historical data suggests it is one of Bitcoin's strongest months, with an average return of 15.66%. With the market stabilizing above key moving averages and institutional demand persisting, the most likely scenario is a new upward wave in the coming month-barring any unexpected negative developments in global markets or monetary policies.

Overall, my outlook for Bitcoin remains positive, though volatility is expected. The $100,000 level will be crucial in sustaining bullish momentum, while a breakout above $110,000 could lead to new all-time highs. Considering the technical and economic factors at play, the most probable scenario is a gradual uptrend with short-term corrections, making the market more suitable for long-term investment rather than short-term trading at this stage.

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