Key Points
- Bitcoin (BTC) price retests crucial support level above $100K amid mixed short-term market expectations.
- Institutional investors continue to show high demand for Bitcoin as a hedge against global inflation and macroeconomic uncertainties.
After reaching a new all-time high of approximately $109K during the 2nd inauguration of pro-crypto US President Donald Trump, Bitcoin’s price dropped over 5% in the last 24 hours to trade at about $102,326 on Tuesday, January 21. This drop occurred during the mid-London trading session. The flagship cryptocurrency has now retested the crucial support level above $100K for the second time, which signals a potential bullish sentiment in the near term.
Technical Analysis and Market Sentiment
From a technical price analysis perspective, Bitcoin’s price has been retesting the bullish breakout from a narrowing wedge, which formed in mid-November. However, a bearish short-term sentiment could prevail, particularly after BTC closed Monday in a shooting star candlestick.
The short-term bearish sentiment is reinforced by the higher-than-expected inflation and a more hawkish sentiment from the Federal Reserve chair ahead of the rate policy change next week. Despite this, Bitcoin’s macro bullish sentiment is heavily influenced by the optimism surrounding Donald Trump’s positive crypto regulatory action.
On his first day in office, Trump instructed government agencies to work on reducing inflation and the cost of living. Additionally, long-term investors are banking on the adoption of Bitcoin by nation-states, especially when the Trump administration establishes a strategic BTC reserve. Several US states led by Massachusetts, Texas, and Utah have already proposed a strategic BTC reserve.
Institutional Demand for Bitcoin
The demand for Bitcoin among institutional investors remains high, serving as a hedge against global inflation, fiat devaluations, and macroeconomic market uncertainties. According to market data analysis by CoinGlass, Bitcoin’s open interest (OI) retested its all-time high above $67 billion.
Meanwhile, the overall supply of Bitcoin on centralized exchanges continues to drop to a multi-year low of about 2.19 million, further escalating the supply vs demand shock. The anticipated entrance of nation-states into the Bitcoin industry has further increased the appetite of institutional investors.
For instance, World Liberty Financial (WLFI) commemorated the inauguration of Trump with a strategic crypto purchase, worth over $100 million. The Trump family-backed DeFi protocol purchased $47 million in Wrapped Bitcoin, thus cementing the President’s position on digital assets.
On Monday, El Salvador defied criticism from the IMF and purchased 11 BTC, thus currently holding over 6,043 Bitcoins, worth over $611 million. Meanwhile, the US spot BTC ETFs have been major Bitcoin purchasers in the past year. Led by BlackRock’s IBIT and Fidelity’s FBTC, the US spot Bitcoin ETFs have accumulated more than 1 million BTCs, worth over $120 billion at the time of writing.
As a result, it is safe to assume that the future of Bitcoin is brighter than before, especially with Trump as the US president.
