Key Insights
- Bitcoin ended weeks of consolidation by hitting a two-month high near $96,000.
- Institutional demand has returned with $1.2 billion in ETF inflows during early January.
- The market is now watching the $94,500 support level and the upcoming Senate markup of the CLARITY Act for the next move toward $100,000.
Bitcoin is finally back in business after a quiet start to the new year.
While other assets like XRP and Solana stole the show earlier, the “king of crypto” was mostly trending sideways.
That seems to have changed on January 14, when Bitcoin surged through heavy resistance to reach a two-month high of $96,082.
Related: Bitcoin Brings Smart Contract to its Blockchain, Two Rival Factions Compete to Create its Framework
Technical Factors Behind the Bitcoin Price Breakout
For weeks, Bitcoin struggled to move past the $94,500 level because this price point acted like a glass ceiling. When the price finally ticked above that mark, it triggered a massive “short squeeze.”
Over $500 million in bearish bets were wiped out in just four hours. And as these traders were forced to buy back their positions, they pushed the price even higher.
This was not a fake move either. Trading volume jumped 45% compared to the previous day.
Historically speaking, high volume during a price spike usually means the move has real staying power. Keep in mind that Bitcoin had spent weeks building up clusters of liquidity just above its trading range.
Once those clusters were hit, the liquidations acted like fuel for the fire and the market cap for the asset has now reached $1.89 trillion.
Why Bitcoin Sat Out the Early January Rally
Many people wondered why Bitcoin’s price was lagging behind smaller coins earlier this month.
While some altcoins saw double-digit gains, Bitcoin only grew by about 5%. This happened because of a phase called capital rotation. Investors were moving money into higher-risk assets to chase bigger profits.
Notably, institutional interest also took a brief holiday break. Between December 17 and December 29, Bitcoin ETFs saw over $1.1 billion in outflows as big firms locked in profits for the year.
US demand was also lower than usual during that time. The Coinbase Premium Index, which tracks the price difference between Coinbase and Binance, hit a negative value of -0.09.
This indicated that American investors were taking a “wait-and-see” approach. They were likely waiting for more news on the CLARITY Act, and without active buying from the US retail sector, the price stayed stuck for several weeks.
Institutional Interest and the ETF Reversal
The quiet period for big money is officially over. In the first two weeks of January, Bitcoin ETFs attracted more than $1.2 billion in fresh capital.
Morgan Stanley led the way as it reportedly expanded its offerings to allow private wealth clients to allocate more money to Bitcoin. This change from outflows to inflows shows that long-term investors are still bullish on the asset.
They see the current prices as a good entry point before the next major run.
This institutional spot buying provides a solid floor for the market. Unlike leveraged trading, ETF buyers generally hold their assets for longer. This reduces the supply available on exchanges and makes it easier for the price to climb.
As the “clean-slate effect” of the new year continues to form, many firms are re-balancing their portfolios.
Macro Data and Regulatory Tailwinds
The sudden jump in Bitcoin price was also helped by the latest economic data from Washington.
On January 13, the Consumer Price Index (CPI) showed that inflation was flat for most of December. This news made investors believe the Federal Reserve might cut interest rates at its January 28 meeting.
When interest rates look like they might go down, riskier assets like Bitcoin usually go up. The US Dollar Index (DXY) also dropped below 99 and created a perfect environment for a rally.
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
