Bitcoin (BTC) has been riding high, teasing new all-time highs (ATH) just after the inauguration of pro-crypto US President Donald Trump. However, Bitcoin’s recent price action has raised concerns among traders and analysts, as the flagship cryptocurrency closed Monday in a shooting star candlestick pattern, a potential reversal signal. After a period of significant gains since January 2023, Bitcoin appears to be entering a critical phase that could lead to a potential crash, as market conditions begin to shift.
Sell-the-News Risks and Bitcoin’s Recent Price Action
The excitement surrounding Trump’s inauguration and his pro-crypto rhetoric led to a surge in Bitcoin’s price, briefly pushing it to new highs. However, the recent sell-off suggests that the market is reacting to “sell-the-news” sentiment, where investors capitalize on recent positive news by selling off their positions for profits.
In the aftermath of this volatility, more than $638 million was liquidated in the leveraged market, with a significant portion involving long positions. This liquidation trend has amplified concerns of a long squeeze, which could add downward pressure to Bitcoin’s price in the short term. As a result, the risk of a crash, or at least a correction, is becoming increasingly likely.
Has Bitcoin’s Bull Cycle Reached Its Peak?
Bitcoin’s recent price surge has put it on a path toward what market analysts are calling the “distribution phase.” After entering price discovery in 2024, Bitcoin is now approaching a point where the bullish momentum might start to fade, giving way to a period of consolidation or a macro bear market.
According to market analyst @Htltimor on the X platform, Bitcoin’s bull cycle for 2024/2025 may have reached its peak, and the asset is transitioning into the distribution phase. Historically, this phase marks the end of a bull run and sets the stage for a prolonged bear market, with prices slowly trickling down as investors unload their positions.
Analysts suggest that Bitcoin could now enter a period of bearish sentiment, with a price target around $85,000 in the coming months. This would likely signal the beginning of a multi-quarter accumulation phase, where the market prepares for the next major bull run leading up to the 2028 Bitcoin halving event. The 2028 halving is expected to be a key driver of the next major price cycle, and the current distribution phase may be an opportunity for long-term investors to accumulate Bitcoin at lower prices.
Whale Investors Remain Confident
Despite the increasing risks of a short-term correction, Bitcoin’s long-term prospects remain strong, particularly with the ongoing interest from institutional investors. Data from Coinglass reveals that the supply of Bitcoin on centralized exchanges has been steadily shrinking, currently sitting at approximately 2.19 million BTC. This suggests that a significant amount of Bitcoin is being moved off exchanges, likely into cold storage, as investors hold onto their assets for the long term.
The approval of spot Bitcoin ETFs in the United States has also contributed to renewed bullish sentiment in the market. With major financial institutions like BlackRock and Fidelity starting their own Bitcoin ETFs, the total net assets of US-based spot Bitcoin ETFs have now surpassed $120 billion. This institutional adoption is seen as a key driver of Bitcoin’s long-term value, even amid short-term volatility.
Additionally, MicroStrategy, the business intelligence firm, continues to purchase Bitcoin through the capital markets. MicroStrategy’s ongoing acquisition strategy, which has made it one of the largest corporate holders of Bitcoin, further reflects the belief that Bitcoin’s value will continue to appreciate over the long term, despite the current market turbulence.
What’s Next for Bitcoin?
As Bitcoin enters this critical phase, traders and investors will be watching closely for signs of either a bullish breakout or a bearish breakdown. The $85,000 price target, which represents a potential downside risk, could provide a level of support for investors looking to accumulate Bitcoin at a lower price point. On the other hand, any positive developments—such as a surge in institutional investment or broader adoption—could reverse the bearish sentiment and push Bitcoin to new highs.
Conclusion
Bitcoin’s current price action and the shift toward the distribution phase have concerns of a potential crash, with $85,000 serving as a key target for a possible price decline. While short-term volatility may lead to bearish sentiment, long-term investors remain confident in Bitcoin’s potential, buoyed by institutional support and growing adoption. As the market navigates these uncertain waters, all eyes will be on Bitcoin’s next moves, with many hoping that any correction will set the stage for a stronger future rally.
Whether Bitcoin faces a crash or a period of consolidation remains to be seen, but the coming months will likely determine the direction of its price for the next few years.
