Bitcoin price signals a potential rebound despite a $393 million liquidation

Bitcoin’s price suffered a significant drop on Monday, crashing to a low of $91,170, marking a sharp 16% decline from its highest level so far this year. The downturn came amid broader market declines, with both cryptocurrencies and stocks facing heavy pressure. One of the key factors contributing to Bitcoin’s crash is the growing concerns about stagflation in the United States, a situation where inflation remains high while economic growth stalls. These fears have weighed heavily on market sentiment, influencing the Federal Reserve’s decision to maintain higher interest rates, which has historically been negative for riskier assets like Bitcoin and stocks.

The catalyst behind the stagflation fears stems from the recently announced tariffs by Donald Trump on American, Canadian, and Chinese goods. The tariffs are expected to raise inflationary pressures as businesses face increased production costs, which could eventually be passed on to consumers in the form of higher prices. With inflation running above the Federal Reserve’s 2% target, there’s growing concern that the central bank will be forced to keep interest rates higher for an extended period. This environment of rising costs and tighter monetary policy puts pressure on markets, especially on assets like Bitcoin that are viewed as more speculative and sensitive to macroeconomic changes.

The immediate market reaction to Bitcoin’s crash was a surge in liquidations. According to data from CoinGlass, nearly $393 million worth of leveraged positions were liquidated, a sharp increase in liquidations not seen in weeks. As the price of Bitcoin fell rapidly, exchanges were forced to close out leveraged bullish positions, triggering even more downward pressure on the price. This type of volatility highlights the risks associated with high leverage in the cryptocurrency market and reflects investor anxiety in the face of broader economic uncertainty.

Despite the sharp drop and the high liquidation levels, there are reasons to believe that Bitcoin’s price may be on the verge of a rebound. First, historical data shows that Bitcoin has often recovered by the end of the week after a significant drop on Monday. This pattern suggests that the cryptocurrency tends to find its footing and bounce back, even after severe price corrections. Moreover, February has historically been a positive month for Bitcoin. Over the past four years, Bitcoin has risen every February, and the average return for the month since 2013 has been around 14%. This trend makes February the second-best month for Bitcoin after November, offering a glimmer of hope for a recovery in the short term.

Another factor to consider is the ongoing trade tensions between the U.S. and China. While the tariffs have contributed to market volatility, there’s a possibility that these tensions could lead to negotiations between the two sides. Bitcoin and the broader stock market may experience a rebound if these trade discussions help ease fears of an all-out trade war. Trump’s use of tariffs as a negotiating tactic could ultimately lead to a resolution that helps improve market sentiment and provide a boost to risk assets like Bitcoin.

From a technical standpoint, Bitcoin’s price has been consolidating over the past few months, with the recent drop bringing the cryptocurrency to a crucial level at $91,170. This level has proven to be a point of support for Bitcoin, as the price has failed to drop below this level since November 2022. The consolidation has led to the formation of a bullish flag pattern, which consists of a sharp drop followed by a period of consolidation in the form of a rectangle. This pattern often precedes a breakout, suggesting that Bitcoin could experience a strong upward movement in the near future.

In addition to the bullish flag pattern, Bitcoin’s price remains above the 50-day and 100-day Exponential Moving Averages (EMAs), which are important technical indicators for determining the overall trend. The fact that Bitcoin has maintained these support levels indicates that the underlying bullish trend is still intact, despite the recent pullback. Given the current price action and historical patterns, it’s likely that Bitcoin will experience a breakout in the coming weeks, with the initial target being the year-to-date high of $109,200.

In conclusion, while Bitcoin’s price has faced significant challenges in the short term, there are several reasons to be optimistic about its future. The cryptocurrency market is often volatile, but Bitcoin’s resilience and historical patterns suggest that a rebound is possible, especially if macroeconomic factors like inflation and interest rates begin to stabilize. With solid technical support at $91,170 and positive seasonality trends for February, Bitcoin may be poised for a strong recovery in the near future. Traders and investors alike will be watching closely to see if the cryptocurrency can break through key resistance levels and continue its upward trajectory.