Bitcoin has continued to trend lower on the back of selling pressure building across the market. In fact, the world’s largest cryptocurrency is now well off its all-time high of close to $126k, with BTC valued at $87.4k at press time.
However, selling pressure might be fading now. Structural patterns point to exhaustion, while improving liquidity conditions suggest capital could begin to re-enter the market. Such a shift would also strengthen the broader recovery outlook.
Bitcoin hits structural exhaustion
Bitcoin’s [BTC] recent decline has been driven by several converging bearish factors that struck the market in succession.
The downturn began on 29 October, following a major liquidation cascade that forced approximately $19 billion out of the market.
This was reinforced by a hawkish Federal Open Market Committee outlook. It pushed institutional investors to reduce exposure, resulting in a record $903 million Bitcoin outflow.
According to 10xResearch, this environment pushed investors towards assets with stronger near-term return potential. This likely explains the recent rallies in traditional safe-haven assets such as gold and silver, both of which hit record highs.
Despite this backdrop, however, market analysis now suggests Bitcoin may be approaching a bullish inflection point and could attempt a multi-week recovery.
In fact, structural patterns at press time indicated that a breakout above the descending resistance trendline could trigger a renewed upside move.
Will conditions support a rebound?
There is a high probability that Bitcoin stages a rebound as the market approaches the new year.
Consider this – Milk Road’s recent analysis compared one-year inflation swaps with the five-year forward breakeven five-year inflation swap and highlighted a widening divergence in long-term inflation expectations.
According to the report, this divergence could turn constructive for Bitcoin, even though such setups are relatively rare.
“Inflation is likely to cool through the first half of 2026, giving the Fed room to cut rates further.”
Cooling inflation would likely return liquidity to risk assets such as Bitcoin. That being said, persistent long-term inflation risks could still limit the pace of capital inflows.
Milk Road also noted that the recent U.S government shutdown drained liquidity from markets. Even so, the firm emphasized that recovery odds remain elevated. It added that reverse repo management could see the Federal Reserve inject up to $40 billion into markets monthly through April.
Finally, the analysis pointed out that quantitative easing has begun. If inflation continues to ease, additional rate cuts could follow – A development that would likely increase capital flows into crypto markets.
Spot investors remain active
Finally, spot investors have continued to accumulate Bitcoin despite recent price weakness – Signaling underlying demand.
Data from CoinGlass revealed that since the first week of December, spot market participants have consistently added to their holdings. In fact, total spot purchases over the past four weeks now amount to approximately $3.72 billion.
Sustained spot accumulation, combined with improving macro and structural conditions, could support Bitcoin’s recovery. This will also increase the likelihood of a move back towards its previous all-time high of $126,000.
Final Thoughts
- Bitcoin’s structural pattern revealed signs of exhaustion, supporting the likelihood of a relief rally.
- Inflation and employment data suggested liquidity could rotate back into financial markets during the first half of 2026.
