What You Should Know

• Bitcoin has formed a shooting star candlestick pattern in December, indicating potential bearish momentum.
• The bulls need to defend the December low to maintain market stability.
• This pattern aligns with global economic trends suggesting short-term challenges for risk assets.

Bitcoin (BTC) kicked off 2025 on a promising note, reaching six figures in value during 2024. Many analysts predict a continued upward trend, with forecasts suggesting BTC could hit $185,000.

However, the price dynamics indicate that sellers are regaining strength, which poses a risk of a significant price decline in the near future.

In December, Bitcoin peaked over $108,000 but ultimately fell, marking its first monthly loss since August, closing below $94,000.

This two-way pricing action resulted in the formation of a bearish reversal candlestick pattern termed a 'shooting star.' This pattern reveals a long upper wick, indicating a considerable gap between the high and the opening price, while showcasing a minimal difference between the opening and closing values.

The upper wick of BTC's shooting star is nearly four times the size of the body, with a tiny lower wick, indicating that while buyers initially pushed prices higher, sellers soon took charge, pushing prices lower.

An examination of the shooting star pattern illustrates that 'the bears may have taken control,' according to the CMT Association’s Level III textbook, which discusses the psychological nuances behind this form.

BTC's monthly chart

The appearance of this shooting star follows a steep climb from $70,000 to over $100,000, hinting at a possible bearish correction, confirmed if prices drop below the December low of $91,186. This is the crucial level for bulls to defend.

Additionally, similar candlestick formations with extended upper wicks have coincided with historic market peaks.

Short-term Pain

The recent shooting star sends a cautious message in light of the broader economic outlook, which appears bleak for risk assets. This sentiment has been exacerbated by recent hawkish indicators from the Federal Reserve, increasing Treasury yields, and a strengthening dollar index.

Nonetheless, experts remain optimistic that the Fed may alter its stance on fewer rate cuts for 2025, paving the way for a bullish future for BTC and other risk assets.

Analyst Alex Kruger, summarizing his expectations for 2025, stated, 'My prediction is simple: higher. The fundamentals remain stable since November 5, indicating that February is likely to be the strongest month. The Fed's recent hawkishness is restricting broader market movements.' 'Expect the Fed to shift back to a dovish approach in Q1, reigniting the prospect of cuts,' Kruger added.