Beware of Bitcoin ‘shooting stars’ at record levels

Bitcoin (BTC) has started the new year well after hitting the six-figure mark in 2024. Most observers expect 2025 to be just as great, with forecasts BTC position at $185,000 And higher.

However, the path may not be as straight up as expected, as recent price action suggests that sellers are looking to reassert themselves, raising the possibility of a notable price decline in the future.

We are referring to the price action in December, when Bitcoin reached a record high above $108,000, but ended the month on a negative note, below $94,000, recording its first monthly loss since August.

The two-way price action formed a bearish reversal candlestick pattern called a “shooting star” on the monthly chart.

The candle is characterized by a long upper wick or shadow, which reflects a large gap between the high and the open for a given period, combined with a small body, which represents a small difference between the open and the close. The wick should be at least twice the size of the body, and the bottom wick can be small at best. In the case of BTC, the upper wick is approximately four times larger than the body, with a small lower wick.

The shooting star shape 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.

“It’s possible that the bears are in control,” explains CMT’s Level 3 book, which highlights the psychology behind the shooting star pattern.

The shooting star appeared after a notable uptrend from $70,000 to over $100,000, warning of a potential bearish reversal ahead, which will be confirmed if prices fall below the December low of $91,186. This is the level to defend for bulls.

Note that similar candles with longer upper wicks have identified previous bull market tops.

Short-term pain

The dovish message from the recent shooting star fits into the broader macroeconomic landscape, indicating tough times for risk assets. It is primarily driven by recent events Tight signals from the FedIn addition to the rise in Treasury bond yields Strengthening the dollar index.

However, analysts are confident that the Fed will reverse its recent decision to signal smaller interest rate cuts for 2025, ensuring a broader upward trajectory for Bitcoin and risk assets in general.

My predictions for 2025 are simple: higher. “Nothing has fundamentally changed since November 5,” trader and analyst Alex Krueger said. “February will be the best-performing month, with recent Fed hawkishness continuing to hamper broader markets in the short term.”

“The Fed will return to easy monetary policy sometime in the first quarter, with traders pricing in further cuts,” Krueger said.

Correction (January 3, 12:30 UTC): Adds the omitted word “not” in the second paragraph.