The potential Bitcoin bounce: Will we see historical highs in February?

The cryptocurrency markets have seen significant haemorrhaging over the past few days, with Bitcoin facing a turbulent journey that has left investors on edge. After a sharp decline to $91,000, BTC has recently begun to stabilize around $99,000, raising questions about its potential trajectory. 

Trump’s tariff wars take their toll

Bitcoin's recent price fluctuations highlight the profound impact of geopolitical tensions on the crypto landscape. The announcement by former President Trump regarding tariffs on Canada, Mexico, and China sent shockwaves through not only traditional markets but also the cryptocurrency sector. This news triggered an unprecedented $2.15 billion in liquidations of futures contracts in a single day, marking one of the most volatile periods in crypto history.

However, a modicum of stability returned to the market after Mexico agreed to deploy 10,000 troops to its border to combat illegal immigration and drug trafficking. This move, coupled with an agreement to delay the tariffs, allowed Bitcoin to recover somewhat. Yet, the looming threat of additional tariffs still poses potential risks for further volatility. Currently, BTC is oscillating between $90,000 and $110,000, and a reduction in geopolitical strains could pave the way for a more substantial upward movement.

Analyzing the long/short term holder trends

To understand the outlook for Bitcoin, one critical metric to consider is the Long/Short Term Holder Threshold. This indicator tracks the capital rotation from long-term investors to new buyers and provides insights into supply dynamics.

Source: Glassnode

Historically, Bitcoin cycles tend to peak when long-term holders cash out and transfer coins to new entrants. Despite over 1 million BTC being transferred to new buyers since November, long-term holders still retain a substantial portion of the total supply, signaling their confidence in Bitcoin's potential for higher prices. This retention amid recent sell-offs suggests that these seasoned investors are not yet ready to capitulate, and many see potential for further gains.

February: Bitcoin’s historical bullish month

February has often heralded a period of extraordinary gains for Bitcoin. Historical data shows that, on average, February yields a 14.4% increase in Bitcoin’s price. If history repeats itself, we could see BTC closing the month near $117,000.

Source: Coinglass

In a pivotal post-halving year like this one, the potential for price increases grows even more significant. Previous post-halving years have seen impressive surges, with experts noting that February has delivered double-digit returns in 8 out of the last 12 years. This combination of favorable historical patterns and current market dynamics fuels optimism for Bitcoin's near-term prospects.

The price cycle: Patterns and predictions

Currently, Bitcoin’s price movements have mirrored the historical 2015-2018 growth cycle, but with some key differences. While the Bitcoin price rose by an astounding 113 times in 2017's peak, the return in subsequent cycles has shown a downward trend, with the previous cycles yielding only a 20 times increase. 

Source: Coinglass

This pattern of diminishing returns suggests that as Bitcoin matures, it will require larger capital inflows to sustain new price levels. Yet, with Bitcoin having already risen 6 times from its cycle low of $16,000 in December 2022, market analysts speculate that the cryptocurrency could still see a multiplier effect in the range of 10x to 13x by the next peak. 

What’s next? Preparing for unpredictable times

As we advance deeper into February, Bitcoin's fortunes will hinge on the interplay of historical trends and current market dynamics. The prospect of a significant rebound remains tangible as the conditions that historically foster growth align with the current market landscape. That said, the unpredictable nature of geopolitical events and monetary policy changes calls for a balanced approach to optimism.

Investors will be watching closely in the coming weeks, eager to see if Bitcoin can reclaim its momentum and push above the $100,000 level-potentially setting the stage for new historical highs. 

As February unfolds, the crypto community remains engaged, understanding that although challenges exist, the emergence of opportunity often comes in the wake of uncertainty. With each passing day, the potential for a Bitcoin bounce grows, and it seems that February may just be the catalyst for a remarkable resurgence in the cryptocurrency's journey. 

At the time of writing BTC is rebounding from previous day losses with price bouncing off support levels near $96,023. Should the up-move face a set-back, price could fall back to that support level again, and should the slide persist, it could be held at the 100-day moving average. On the upside, BTC could face a hurdle at the $102,550 and $106,450 resistance levels. Traders should be wary of RSI being flat at the midline in the immediate term, as it suggests a slowdown in momentum which could hint at a consolidation. 

Source: Deriv MT5