Bitcoin Traders Take a Pause, Waiting for New Price Drivers

Open interest in BTC futures, an indication of traders’ activities, has been steadily declining since January 21, data from CoinGlass shows.

Currently, they stand at their lowest level since November 18 at $58.2 billion. Back then, the price of BTC was standing at around $90,500 and the post-election rally was still raging on.

Right after Donald Trump entered the Oval Office, he drafted his first pro-crypto Executive Order (EO) titled “Strengthening American Leadership in Digital Financial Technology” to follow through with his campaign promise of making the United States the crypto capital of the world.

Among the many provisions that this document contains, he set up a Working Group on Digital Asset Markets that will study the possibility of creating a “digital asset stockpile” that could initially contain the cryptocurrencies that the government has seized in recent years.

The crypto industry sees this instruction as one of the most powerful catalysts for a huge leap in the price of digital assets, as it would be the first time that a superpower like the United States considers cryptocurrencies a “strategic” asset like oil.

Bitcoin: No Signs of a Reversal Yet

BTC is currently sitting nearly -10% below its January 20 all-time high of $109,114. This latest decline unfolded after a bearish double-top pattern formed in the daily chart that signaled an upcoming trend reversal.

The pattern’s bearish outcome was confirmed by a sustained decline in the MACD and a move below the signal line in the Relative Strength Index (RSI). Roughly eleven days after that sell signal, the price has dropped by -4.2%.

As of today, the MACD is posting a lower reading compared to yesterday. This is typically an indication that negative momentum is decelerating, but it is still too early to tell if the trend will change, as the Relative Strength Index (RSI) is still below the signal line.

For now, bears keep dominating the price action unless the RSI says otherwise. The nearest support area for BTC in the daily chart is found in the low $90,000s. This implies a downside potential of -7.9% for the cryptocurrency.

Potential Reversal Triggers

The approval of a robust pro-crypto legislative agenda and further positive announcements on the regulatory front could be one of those positive catalysts.

Recently, the acting Chairman of the United States Securities and Exchange Commission (SEC), Mark Uyeda, announced the creation of a Crypto Task Force that will work alongside major players in the blockchain industry to draft comprehensive regulatory guidelines to help the sector thrive in the U.S.

In addition, the approval of new exchange-traded products (ETPs) for altcoins like Ripple (XRP) and Solana (SOL) could also propel the price of BTC, as it would mean a positive step forward by the SEC to bring cryptocurrency to mainstream and institutional investors.

Finally, further institutional adoption of cryptocurrencies and blockchain technology could also catalyze a major increase in the market cap of digital assets.

One clear example of this was BlackRock’s decision to set up a fund called BUIDL in partnership with Securitize to explore the potential of tokenization for the financial industry.

Recently, during a conference in Davos, the head of BlackRock, Larry Fink, commented that he could see the price of Bitcoin rising to around $700,000 if the cryptocurrency continues to be embraced by countries undergoing political turmoil as a safe haven asset.