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In three full weeks of upward movement, Bitcoin made a bullish breakout of several key resistance levels. The price confidently consolidated above $22.5k, but later the asset began to have local problems.
Above the $22.5k level, the sellers' resistance began to build up, and the longs/shorts ratio is gradually approaching consensus. At the same time, news that Bitcoin has exceeded the average cost price is emerging, which has also strengthened the bears' position.
To top it all off, after the all-time BTC outflow at the end of 2022, dormant wallets began moving assets to exchanges. This happened as part of the process of fixing local profits or closing positions at breakeven.
All these movements are a classic market reaction to a strong bullish trend after months of consolidation and decline. Also, do not forget that BTC technical indicators have been in the overbought zone for more than a week.
Having made a series of unsuccessful retests of the $23k level, the positions of the bulls began to weaken. Over the past five days, five candles with long lower and upper wicks have formed on the Bitcoin daily chart, indicating a fight for the initiative.
The correlation between the SPX index and Bitcoin weakens from time to time, which allows the assets to implement their own price movement scenarios. This process will continue as buyers become more active.
As a result of yesterday's trading day, assets again strengthened the level of correlation and ended the session in a similar situation. At the same time, SPX shows greater stability, leveling the selling pressure and holding the $4,000 level.
This is where the excess volatility of Bitcoin, which showed more active and profitable growth in a shorter period of time, comes into play. As a result, the cryptocurrency was more overbought in all technical metrics, and therefore we can assume that BTC will set the dynamics of the movement, and the SPX index will follow it after a few days.
Bitcoin network activity charts show that mid-January saw an unprecedented surge in investment activity over the past six months. As a consequence, the coin managed to form several large green candles. This process was also confirmed by the upward dynamics of the asset's trading volumes.
However, as of January 25, there is no doubt that the local peak of trading activity has been passed. Network metrics start to decline but hold high positions. We see the corresponding results on the Bitcoin chart.
The asset reached a local peak and finally moved to the consolidation phase. The stabilization process will occur within the $22.3k–$23.4k range. The lower boundary of the corridor was formed following the results of yesterday's trading day, when sellers tried to force out the bulls, but faced a backlash near $22.3k.
Technical metrics look overbought, and therefore the consolidation phase may be delayed. The on-chain activity of the cryptocurrency has also begun to decline, and therefore BTC will expect a reaction from market makers or a strong news event.
This may be the Fed meeting in early February, where there will be another slowdown in the rate hike. It is expected that the indicator will increase by only 0.25%. This will give investors more confidence in the gradual curtailment of the quantitative easing policy.
Bitcoin has reached a local high, and we can expect a consolidation movement within the range of $22.3k–$23.4k in the coming days. Given that trading activity remains at a decent level, volatility spikes are not ruled out.
Do not forget that BTC has completed the formation of the cup and handle pattern. In the medium term, this means that we can count on the upward movement of the cryptocurrency to the levels of $28k–$30k.
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