Key Points
- Bitcoin’s three-month momentum has turned positive, sparking cautious optimism among traders.
- However, historical data shows similar setups often leading to sharp market reversals, necessitating caution.
Bitcoin [BTC] has shown a shift in market momentum over a three-month timeline, turning green and causing a stir of cautious optimism among traders. Despite this, experienced traders are refraining from celebration due to past experiences of similar setups leading to sharp market reversals.
As Bitcoin nears the crucial $104,000-$105,000 zone, the coming days will determine whether the rally will continue or dissipate quickly.
Understanding the Significance of 3-month Momentum
Recent data indicates Bitcoin’s 3-month percentage change has decisively shifted to positive territory. This signal has often been a precursor to major market movements. However, this change is not always indicative of a bullish market.
Historical patterns show that such positive shifts often precede sharp market downturns, catching traders by surprise. The current setup, therefore, necessitates caution. While momentum is building, a lack of sustained follow-through, especially above the $104K–$105K level, could potentially be a bull trap.
Historical Trends and Market Sentiment
Historically, positive shifts can go either way. In early 2018, mid-2019, and late 2021, similar positive shifts led to sharp downturns, trapping momentum traders. The current setup mirrors these, making caution paramount.
Supporting this, the aggregated funding rate has been steadily increasing, reaching 0.0132 at the time of writing. This suggests a growing bullish sentiment among traders, though not yet at euphoric levels. If the funding rate continues to rise, the market could become volatile.
The 104K-105K Resistance
Bitcoin is currently testing the $104K-$105K resistance zone, with momentum indicators showing uncertainty. The RSI has reached overbought territory at 74.46, suggesting a potential pullback unless bulls maintain pressure. Meanwhile, the OBV remains subdued, indicating that volume isn’t fully supporting the rally.
Both the 50-day and 200-day SMAs are comfortably below, indicating that long-term support remains intact. If BTC breaches $105K with strong volume, a breakout towards new highs is possible. However, without a surge in volume, rejection and consolidation are more likely.
