: Jodbol
The candlestick pattern shows that sellers are looking to reassert themselves as expectations of hawkish interest rates from the Fed push the US Dollar Index higher.
Written by Omkar Godbole
January 3, 2025, 7:12 AM UTC
Bitcoin's shooting star candle indicates caution among bulls. (gustavito1917/Pixabay)
Bitcoin's shooting star candle indicates caution among bulls. (gustavito1917/Pixabay)
Read less
What you need to know
:
Bitcoin registered a star candle in December, indicating a renewed downtrend.
The December low is the level that bulls should defend.
The pattern is consistent with macro developments that point to short-term distress for risk assets.
Bitcoin (BTC) started the new year on a positive note after hitting the six-figure mark in 2024. Most observers expect 2025 to be just as great, with Bitcoin price forecasts set at $185,000 and higher.
However, the road ahead may be straight up as expected, as recent price action suggests that sellers are looking to reassert themselves, increasing the likelihood of a significant price drop in the future.
We are referring to the price action in December, when Bitcoin hit a record high above $108,000 but ended the month negative, below $94,000, recording its first monthly loss since August.
The bi-directional price action formed a bearish reversal candlestick pattern called a “Shooting Star” on the monthly chart.
A candlestick is characterized by a long upper wick or shadow, reflecting a large gap between the high and the open of the specified period, coupled with a small body, representing a small difference between the open and close. The wick should be at least twice the size of the body, and the lower wick can be tiny at best. In the case of BTC, the upper wick is about four times the size of the body, with a small lower wick.
The shooting star pattern shows that buyers initially pushed prices higher, only for sellers to take control near the highs and push prices below the opening level, indicating a renewed downtrend in the market.
The CMT Level 3 book explains that “bears are likely to dominate,” shedding light on the psychology behind the shooting star pattern.
Bitcoin (BTC) monthly chart. (TradingView/CoinDesk)
Bitcoin (BTC) monthly chart. (TradingView/CoinDesk)
Read more
The shooting star appeared after a significant uptrend from $70,000 to over $100,000, warning of a possible bearish reversal ahead, which would be confirmed if prices drop below the December low at $91,186. This is the level that bulls should defend.
Note that similar candles with longer upper wicks represented previous bull market tops.
short term pain
The dovish message from the latest rising star is in line with the broader macroeconomic landscape, which points to tough times for risk assets. This is primarily due to recent hawkish signals from the Federal Reserve, along with rising Treasury yields and a strengthening dollar index.
However, analysts are confident that the Fed will reverse its recent decision to signal smaller rate cuts by 2025, ensuring a broader upward trajectory for Bitcoin and risk assets in general.
“My 2025 outlook is simple: higher. Nothing has changed substantially since November 5th. February will be the best performing month, with the recent Fed hawkishness continuing to hold the broader markets in check in the near term,” said analyst and trader Alex Krueger on X.com.
"The Fed will return to quantitative easing sometime in the first quarter, with traders pricing in further cuts again," Krueger said.