3 Reasons Why Bitcoin Price May Surge to $123k in January
The Bitcoin market has seen some turbulence recently, driven by uncertainties in the bond market and a vigilant stance by the Federal Reserve. This volatility caused Bitcoin (BTC) to fall below $95,000, triggering a broader sell-off in the altcoin market. Despite the current downturn, several factors suggest that Bitcoin might experience a significant rebound, potentially reaching $123,000 in January.
1. Imbalance Between Demand and Supply
A primary reason for a potential bounce back in Bitcoin’s price is the continuing imbalance between demand and supply. Demand for Bitcoin has been on the rise, a trend underscored by increasing exchange-traded fund (ETF) inflows throughout the year. Spot Bitcoin ETFs have managed to accrue a net addition of $1.3 billion in assets this year, reflecting a strong institutional demand. Furthermore, prominent companies such as MicroStrategy have been enhancing their Bitcoin holdings.
Additionally, Bitcoin whales—individuals or entities holding large quantities of Bitcoin—have been quietly accumulating more of the digital currency, with an addition of approximately 34,000 coins since December. This rising demand contrasts with the decreasing supply, as evidenced by declining Bitcoin balances on exchanges. According to recent data, the number of BTC coins held on exchanges has diminished to its lowest point in several years, now standing at 2.1 million, a decrease from 2.72 million in January 2024. This demand-supply imbalance could create upward pressure on Bitcoin’s price in the near future.
2. Impact of the FTX Estate Distribution
The forthcoming distribution of $16 billion from the FTX Estate to investors and creditors is another catalyst that could positively affect Bitcoin’s price. These funds are currently tied up in stablecoins like Tether (USDT) and USD Coin (USDC). While a portion of this money is expected to be converted into cash, a significant amount is likely to be exchanged for cryptocurrencies, including Bitcoin. This influx of capital into the crypto markets could serve as a driving force for Bitcoin’s price surge.
3. Upcoming Changes in Crypto Regulations
In a rapidly evolving regulatory landscape, significant changes are anticipated with Donald Trump assuming office on January 20. This shift is expected to usher in new cryptocurrency regulations. Though much of this information has already been factored into market prices, it is possible that Bitcoin and other altcoins could see an upward trend in anticipation of the event and the potential resignation of Gary Gensler.
Technical Indicators Supportive of an Uptrend
Bitcoin’s technical indicators also suggest a possible upward movement in January. On the weekly chart, Bitcoin has formed a bullish pennant pattern, a technical analysis signal that often heralds a continuation of the existing trend. This pattern is characterized by a lengthy vertical line followed by a triangular consolidation phase. The recent lateral movement of Bitcoin falls within this pennant formation, indicating potential for a breakout.
Further supporting this bullish outlook are the 50-week and 100-week Exponential Moving Averages, which suggest that the prevailing bullish trend remains intact. The Market Value and Relative Value indicator has climbed to 2.4, suggesting that Bitcoin is still considered undervalued at its current price.
Moreover, Bitcoin has not yet reached the target set by its cup-and-handle pattern, another favorable technical indicator. The cup formation, with a depth of 75%, provides a projected target. Measuring the same distance from the crest of the cup points to a target price of $123,000 for Bitcoin.
In summary, while Bitcoin is currently experiencing some market headwinds, the imbalance between demand and supply, incoming capital from the FTX Estate distribution, and potential regulatory shifts suggest a positive outlook. Combined with bullish technical patterns, these factors indicate a possibility for Bitcoin to reach new heights in the upcoming month.
