Key Insights:

• Bitcoin (BTC) formed a shooting star pattern in December, indicating potential bearish behavior.
• Bulls need to defend December’s low as support.
• This candlestick pattern aligns with market trends hinting at short-term difficulties for risk assets.

Bitcoin began the year strong, having crossed the six-figure mark in 2024, with optimistic projections for 2025 suggesting it could reach upwards of $185,000. Despite this, the market's recent behavior raises concerns over possible setbacks as sellers are appearing poised to regain control.

In December, Bitcoin peaked above $108,000 but closed the month lower, below $94,000, marking its first monthly loss since August and forming a bearish candlestick pattern referred to as a "shooting star". This candlestick is characterized by a long upper wick, indicating buyers initially drove prices up and sellers later pushed down,

"The bears are potentially in control," notes the CMT Association's Level III textbook, which explains the market psychology behind the shooting star formation.

Shooting Star Candle Source: Pixabay

The emergence of this pattern following a well-defined uptrend raises caution, particularly as it suggests a bearish reversal unless prices maintain above $91,186, December’s low.

Broader Market Context

The shooting star pattern closely follows macroeconomic signals, particularly from the Federal Reserve, indicating challenging times for risk assets due to rising Treasury yields and a strengthening dollar index. Yet analysts remain optimistic, believing the Fed will eventually shift back to a more dovish approach, potentially positioning Bitcoin and other risk assets favorably for the year.

Alex Kruger predicts, "Nothing has fundamentally changed since Nov. 5. February will be the best-performing month despite the Fed's current hawkish stance."

Key Terms:Bitcoin, Market Trends and Technical Analysis.