Bitcoin (BTC) Bull Run May Be Coming to an End, Three Developments Suggest

Since early 2023, Bitcoin (BTC) has chalked out a classic stairstep bull run, characterized by incremental price increases followed by periods of

Bitcoin (BTC) has consolidated within a bullish stairstep pattern since early 2023, setting the stage for a bull breakout from the $20,000 bull run. However, three key developments suggest that BTC may face difficulties in continuing its stairstep bull run towards $120,000.

Bitcoin price hints at a 2021-like topping pattern as it grinds higher

Bitcoin price has been grinding out a stairstep bull run since early 2023, leaving behind three consolidation ranges on the 14-week chart. Each breakout from the consolidation has led to a new leg up in the rally from $20,000.

Now, as BTC price attempts to rally towards $120,000, three macro and technical developments hint at a possible slowdown in the stairstep pattern.

Tightening USD liquidity may hinder risk asset performance

One thing that any asset class, not just crypto, typically dislikes is the tightening of fiat liquidity, especially the global reserve currency, the U.S. Dollar (USD). To the dismay of BTC bulls, the dollar liquidity is tightening due to several factors, as Arthur Hayes, chief investment officer at Maelstrom, noted on Yahoo Finance Live.

"The traders on the floor are saying that the liquidity is drying up. We're seeing this in the Treasury General Account, which is the U.S. government's checking account at the Federal Reserve."

Notably, the USD cash balance held in the Treasury General Account (TGA) has increased by $176 billion in four weeks, according to data source MacroMicro.

After the U.S. hit its self-imposed debt limit of $36 trillion last month, markets hoped that the Treasury would run down the TGA balance as part of extraordinary measures to keep the government functioning, inadvertently enhancing liquidity in the economy and markets.

"We're looking at a scenario where key liquidity sources are drying up or being more tightly controlled. This could lead to a slowdown in economic activity, higher borrowing costs, and potentially a more challenging environment for risk assets, including crypto," Anddy Lian, thought leader and intergovernmental blockchain expert, told Cointelegraph.

Trump administration to 'evaluate' strategic BTC reserve, dulling crypto anticipation

Another development that has fallen short of crypto investors' expectations is the Trump administration's approach to establishing a strategic BTC reserve. It was a significant catalyst behind BTC's surge from $70,000 to over $100,000.

However, the administration seems to be taking a more cautious approach, opting to "evaluate" the feasibility of creating such a reserve. It's a shift from Trump's typical swiftness in addressing campaign promises.

"Wait, Trump said he would do a $BTC Reserve, not promise to 'evaluate it.' Evaluate/Study is what Washington does when they don't want to do something," Jim Bianco, president and macro strategist at Bianco Research, LLC, said in a recent commentary.

BTC price dropped from over $100,000 to $96,000 during the overnight trade after Trump's crypto Czar told CNBC that a top agenda item for his new task force is evaluating the feasibility of a bitcoin reserve.

Reappearance of a 2021 topping pattern in BTC price technicals

Finally, those looking at technical charts to gauge the next move might want to pull up the 14-week relative strength index (RSI) on their screens.

That's because the oscillator has recently diverged bearishly in a move that marked the 2021 top. A bearish RSI divergence contradicts the higher high in prices, signaling a slowdown in the bullish momentum.

A closer look at the 14-week RSI reveals that the oscillator formed a lower high relative to its December peak, diverging bearishly from the continued price uptrend into 2024. This setup is similar to the one that preceded the 2021 top.

The negative setup would be invalidated should the RSI cross above the falling trendline, representing the divergence, indicating a renewed bullish momentum.