Bitcoin plunged to around $89,190 before rebounding, and as of this article's writing, has recovered to the $9,800 range. Although the price movements have been volatile, the overall trend remains bullish. Bitcoin traded mostly sideways during the day and has maintained a rise of about 2.7% over the past 7 days.
What matters is not the decline itself, but what has formed beneath it. Momentum is being maintained, with spot investors increasing their purchases during the downturn, and derivative positions quietly building up near key levels.
RSI shows momentum alignment, continuation of cup with handle pattern
Bitcoin is currently in the process of forming a cup-and-handle pattern on the daily chart. This pattern consists of price forming a bottom, temporarily stagnating at the handle, and then attempting to break through resistance.
The recent drop to around $89,190 did not break the pattern but instead deepened the handle. Momentum remains strong. RSI (Relative Strength Index) is an indicator of price momentum; when RSI moves in the same direction as price, it confirms the strength of the trend.
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From December 9 to January 5, Bitcoin reached new highs, and RSI also recorded new highs. This alignment indicates that momentum is consistent with price action. No bearish divergence has been confirmed at this point, suggesting low risk of a near-term collapse.
Two barriers remain. Bitcoin must first break above the upper limit of the handle, then surpass the neckline. Until these levels are cleared, the breakout remains only a signal and not yet confirmed.
Physical accumulation continues, pressure intensifies in the derivatives market
On-chain data shows that long-term holders are not selling during downturns but are instead accumulating more.
Hodler Net Position Change measures whether long-term holders are accumulating or selling Bitcoin. On January 6, when Bitcoin traded around $93,700, this indicator stood at approximately 9,933 BTC. During yesterday's downturn, it rose to about 12,322 BTC.
A buildup of about 2,400 BTC over two days, representing approximately 24% of the total. This shift is significant, indicating that the previous pattern of selling after gainsâobserved until the end of Decemberâhas now changed.
At the same time, positions in the derivatives market are heavily skewed to one side. Looking at perpetual futures liquidation data, cumulative short liquidations amount to approximately $3.9 billion, while long positions total around $2.3 billion. Shorts are roughly 70% higher than longs.
This imbalance generates pressure. If prices rise, short sellers will be forced to buy back to cut losses, turning into buying pressure in the market. This dynamic can accelerate the breakout once a key resistance level is breached.
Around $94,820, there is a major short liquidation cluster with approximately $2.6 billion worth of short positions concentrated. This level is also near the neckline of the cup-and-handle pattern, making it a key focus point moving forward.
Simply put, physical accumulation is supporting the downside, while leveraged short positions are building upward breakout momentum. These two dynamics form the basis for expectations of a breakout.
Critical price zone for a 12% rise in Bitcoin
The current BTC price level will be decisive for the future. The first major barrier is around $92,390. Sustained breakout above this level would signal a breakout from the handle.
Next key level is around $94,900. A close above this level would likely result in a swift breakout past the previously mentioned major short liquidation cluster, coinciding with neckline breakout. Once surpassed, this level could trigger a chain reaction of forced buybacks.
If this scenario materializes, the measured move for the cup-and-handle pattern would be approximately a 12% rise, with targets ranging from $104,000 to $107,250. A temporary resistance is expected around $96,700 along the way.
Downside risk remains clear. If Bitcoin trades above $88,340, its price structure is maintained. A drop below $86,560 would weaken the pattern. A breach below $84,310 would render it completely invalid.
At present, Bitcoin has not broken down. Momentum remains aligned, long-term holders are buying during dips, and leverage could amplify an upward move. If price reclaims the handle and neckline, the conditions for a breakout are already in place.
