Bitcoin Price Compression Deepens below 100k

Market Overview: Bitcoin

For this week’s Bitcoin analysis, I have shifted back to spot charts, which should align better with the daily timeframe analysis. While the IBIT ETF breakout mode pattern on daily remains activated by bears, we can now observe the emergence of a contraction pattern—a triangle— on the daily bitcoin spot chart.

Bitcoin

The Weekly chart of Bitcoin

This week, Bitcoin attempted to push beyond previous week’s key prices but ultimately failed to sustain movement in either direction. The price failed to trade below the previous inside bar’s low, indicating that sellers lacked the momentum to drive prices downward decisively. Shortly after, Bitcoin tested the previous week’s high but failed to break out, confirming that buyers, too, were unable to generate enough demand for a bull breakout attempt.

Periods of tight consolidation, especially at key levels, often precede strong directional moves. The continued rejection of both highs and lows suggests that traders are waiting for a more definitive price breakout before committing to either direction. This highlights the importance of recognizing that breakouts from a range can occur in both directions, and that a market at equilibrium can quickly shift into a trending phase.

Historically, Bitcoin has shown a tendency to favor bull breakouts over bear ones. When the price moves downward from a consolidation phase, it is typically driven more by profit-taking and hedging from bulls rather than a genuine increase in bears. On the other hand, bull breakouts have a higher probability of sustained movement due to Bitcoin’s long-term growth and resilience narrative.

Currently, Bitcoin remains within the BOM pattern, which continues to shape short-term price behavior. When a BOM pattern follows a bull trend, it usually results in one of two outcomes: a bull continuation, where the price resumes its upward trajectory, or a bear reversal, signaling that sellers have gained control and a drawdown or a wider trading range emerge. The more sideways, the more liquidity is building up, and when the breakout occurs, it is likely to be accompanied by a surge in volatility.

Understanding the key price magnets in play is crucial for anticipating potential market movements. On the downside, there are several important levels that traders are watching closely. There is the 26-week moving average, 26 weeks represent 6 months of trading; there also is the Weekly Breakout Point, which is the highest price of 2024’s 8-month trading range.

On the upside, the first major technical objective is the measured move that emerges from the 2021 drawdown height, which suggests a potential move beyond $120,000. If Bitcoin successfully breaks out from its BOM pattern, the pattern itself projects an even higher potential move toward $130,000.

A Breakout Mode Pattern typically carries a nearly 50/50 probability of breaking out in either direction. However, Bitcoin’s historical trend suggests that bull breakouts are more likely to see sustained follow-through. Given this, the most prudent trading strategy revolves around two key approaches.

The first involves accumulating Bitcoin near key support levels in case of a price decline, particularly at the mentioned supports. The second approach is to wait for a confirmed breakout above the BOM pattern before entering long positions. This method ensures that traders align with the dominant market direction while minimizing downside risk.

With Bitcoin still trading within its range, market participants must remain flexible and prepared for both bull and bear outcomes. Given the structure of the current consolidation, a breakout in either direction is likely to trigger increased volatility, making risk management a critical component of any trading decision.

The Daily chart of Bitcoin

Bitcoin remains within a well-defined trading range, which has persisted since it first approached the psychological $100,000 level in November. This round number has acted as a natural resistance zone, with price action struggling to establish sustained movement beyond it. Since then, breakout attempts above and below both minor and major highs and lows have repeatedly failed, confirming that Bitcoin is currently range-bound rather than trending.

In January, Bitcoin made a strong bull leg, attempting to break above its 2024 all-time high. However, the breakout attempt ultimately lacked follow-through. A crucial observation here is that our price action indicator, which is inertia-based, did not paint the bars green during this rally. This is significant because when price bars remain uncolored by the indicator, it signals that momentum is, more often than not, not sufficiently strong relative to previous price action. When this happens, the likelihood of a successful bull breakout diminishes, and as we saw, the rally eventually stalled.

A divergence appeared between Bitcoin’s spot price and IBIT (the largest Bitcoin ETF). While Bitcoin’s spot chart registered an all-time high, IBIT did not reach the same level. This divergence exists because Bitcoin’s spot ATH occurred during overnight hours, a period characterized by lower trading volume compared to U.S. market hours, when IBIT is actively traded. While this divergence is relevant for understanding price dynamics, it does not materially change our approach. At the end of the day, we do not trade what we think—we trade what we see.

Looking at the moving average, Bitcoin recently attempted to regain its 30-day moving average, which we use as a reference for monthly price trends. A simple yet effective trading rule is to avoid swing trading bullish strategies on lower timeframes (such as the 1-hour chart) if the daily price is below this moving average. Traders who prefer analyzing IBIT ETF can use a 20 or 21-day moving average as a similar guide. A moving average is not essential for making trading decisions. The key takeaway remains the same: when price is trading below its key moving average, the bias leans bearish in the short term, and traders should exercise caution on bull setups.

Now, focusing on what we see in the charts, we observe that Bitcoin has activated a Breakout Mode Pattern (BOM) to the downside on the IBIT ETF. However, on the daily spot chart, this pattern is not obvious. Instead, Bitcoin’s spot price has spent the past several weeks contracting near the apex of its multi-month trading range. This contraction has resulted in the formation of a Triangle pattern, which itself is a BOM structure.

Triangles represent a period of range contraction, where volatility compresses as traders await the next directional move. When a market reaches this stage, trading activity consolidates within a narrowing price band, with neither buyers nor sellers taking clear control. This setup inherently leads to an eventual breakout, as price cannot remain in a state of compression indefinitely.

On the daily chart, we have marked the current key buy and sell levels with highlighted boxes. These points represent the breakout triggers that traders should be watching. The best approach for trading this pattern is to wait for a strong daily close beyond the highs or lows that define the Triangle’s key levels. A strong close in this context means a decisive break with follow-through, rather than a momentary price spike.

In the absence of a strong breakout close, another valid approach is to observe multiple price bars moving beyond the key levels without facing immediate rejection. This kind of price action would suggest that a breakout is in progress, even if the initial move appears gradual rather than explosive.

For daily chart swing traders, the primary objective is to target key levels that align with the broader weekly analysis. For bulls, the ideal breakout scenario would drive prices towards the measured move based on Bitcoin’s 2021–2022 drawdown, which projects an upside target near $120,000. Then the weekly BOM projection, which extends even further to approximately $130,000.

On the bear side, sellers will likely aim for at least $80,000 as a minimum target. However, the preferred bearish scenario would involve Bitcoin pushing lower toward the weekly breakout point around $74,000, where stronger support is expected.

At this stage, Bitcoin’s daily price action remains in a consolidation phase, and traders should remain patient for a clear confirmation of breakout direction. Whether the market moves higher or lower, the coming sessions will likely provide increased clarity as Bitcoin moves closer to resolving its compression pattern. Until then, risk management remains key, and traders should be prepared once a breakout occurs.

We encourage you to share your thoughts, insights, and experiences in the comments section below. If you found this report helpful, consider sharing it with fellow traders so we can continue to grow together.

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