What could drive the next rally?

While market participants expect BTC to make a positive turn from this crucial level, historical patterns suggest there may be more bloodshed on the way.

Last week, Bitcoin (BTC) broke through critical resistance levels following the massacre weeks ago. The asset’s slow but steady recovery indicates that the market is stabilizing. This leaves analysts guessing what catalyst could fuel the next rally.

In the latest edition of Bitfinex Alpha reportMarket experts predicted that changes in the macroeconomic landscape could drive liquidity towards bitcoin. Volatility in traditional asset classes such as oil and fiat currencies could help stabilize the cryptocurrency market and drive positive price movement in the coming weeks.

Crypto market stabilizes

According to Bitfinex, BTC spent the past week trading below the short-term holders’ (STH) cost basis of $113,600, which hovers around the 0.85 quantile level. That dynamic indicated signs of market fatigue and fading momentum. However, the market improved over the weekend as tariff discussions between the United States and China progressed and BTC regained those resistance levels.

However, the STH cost basis remains crucial for BTC to maintain a bullish trajectory. BTC needs to stay above $113,600 to establish a shift in the market structure from defensive to constructive.

While market participants expect BTC to make a positive turn from this crucial level, historical patterns suggest there may be more bloodshed on the way. Persistent weakness below STH’s cost basis has indicated structural weakness in the past and often preceded deeper corrections towards the 0.75 quantile, which now sits around $97,500.

Currently, BTC is around $114,400; However, a drop below $113,600 could trigger a drop to $97,500. This level could serve as a minimum for this consolidation phase. Analysts say a move towards this lower bound will be consistent with patterns from previous cycles. The positive side is that such a move will mark the exhaustion of selling pressure, providing the basis for the next uptrend.

Volatile macro landscape

As the market prepares for its next move, changes in energy prices and currency markets are affecting global liquidity flows. Fortunately, cryptocurrencies appear to be absorbing some of the capital turnover.

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There is a rise in oil prices and currencies such as the Japanese yen have weakened. These developments, coupled with geopolitical tensions, have led investors to reassess their exposure to risk assets. Institutional traders are now evaluating their investments in bonds and stocks and are likely leaning towards cryptocurrencies.