Bitcoin’s (BTC) recent price rally faces a potential cooldown as global liquidity conditions shift, warns Jamie Coutts, chief crypto analyst at Real Vision. Despite reaching new all-time highs, Bitcoin’s short-term prospects could be hindered by macroeconomic factors and a strengthening U.S. dollar.
Bitcoin Rally Hits Liquidity Roadblock
Coutts highlighted Bitcoin’s resilience against a deteriorating liquidity backdrop, noting that while further gains are possible, the next two to three months could bring significant challenges. He pointed to his Bitcoin (BTC) MSI macro model, which turned bearish in mid-October, suggesting that Bitcoin’s rally may be running on “borrowed time.”
“Bitcoin has hit new ATHs in the face of a deteriorating liquidity backdrop. If conditions worsen, the rally, while euphoric, can only last for a limited time,” Coutts explained on X (formerly Twitter).
Flash Volatility Raises Concerns
On Dec. 6, Bitcoin (BTC) experienced sharp intraday volatility, with prices briefly dipping $10,000 in what traders dubbed a “Darth Maul” candle. The sudden correction liquidated hundreds of millions of dollars in both long and short positions, amplifying market uncertainty.
Liquidity and Dollar Strength Pose Risks
Coutts emphasized that liquidity metrics, which have shown sustained bearish momentum since October, often lead to Bitcoin’s (BTC) poorest returns. His analysis suggests that Bitcoin price movements lag behind liquidity changes by approximately two months, indicating potential pressure in the near term.
Adding to the uncertainty, the U.S. dollar index (DXY) recently touched its highest levels since November 2022. A sustained breakout in the DXY could trigger a sharper pullback across risk assets, including Bitcoin. However, Coutts remains cautiously optimistic, hoping the dollar’s strength is a “fake breakout.”
What’s Next for Bitcoin?
Bitcoin’s (BTC) current price near $98,000 underscores its resilience, but analysts urge caution. Factors such as global liquidity, dollar strength, and macroeconomic conditions will play pivotal roles in shaping Bitcoin’s trajectory as it approaches 2025. While long-term prospects remain bullish, traders should brace for potential short-term turbulence.
