Bitcoin Faces Uncertainty: $90K Support Retest and Market Sentiment Weigh on BTC's Outlook

As February draws to a close, Bitcoin finds itself in a precarious position. Traders and investors are increasingly concerned about the potential for a dip back toward the $90,000 mark, with liquidity building up on both sides of the current spot price. After a failed attempt at a breakout last week, Bitcoin (BTC) is limping through a narrow trading range, leaving bulls and bears at odds, with market momentum favoring the latter as the monthly close approaches.

Here are five key things to know about Bitcoin this week:

1. Liquidity and Tight Range Keep Bitcoin in Limbo

Bitcoin’s price has remained in a tight range recently, with notable liquidity piling up at both support and resistance levels. According to data from Cointelegraph Markets Pro and TradingView, after a failed upside breakout triggered by a Bybit hack last week, BTC remains stuck. Liquidity levels on the exchange order books are showing a delicate balance between long and short liquidations, hinting that either direction could be taken with one significant move.

One trader, CrypNuevo, emphasized that the market is primed for an upside move, especially given the current downtrend on lower timeframes. He highlighted key resistance levels around $94.7K and $92.5K as pivotal areas to watch. However, another trader, Roman, is less optimistic and expects Bitcoin to retest the lower end of its multi-month range, with a potential dip back to $90,000 if the upward momentum fails to materialize.

2. Bull Market Support Band in Focus

On longer timeframes, traders are keeping an eye on Bitcoin's bull market support band, a crucial indicator formed by two moving averages. This support zone has held firm since October 2024, when Bitcoin broke through previous all-time highs near $73,800. Trader Luca suggested that Bitcoin could be poised for an upward move as it approaches this key support level. Despite low funding rates and negative sentiment, the current market setup could lead to an eventual price rally, but that will depend on whether BTC can maintain support at the $90K level.

3. US Inflation Data and Stagflation Concerns

This week, Bitcoin traders are also bracing for crucial US economic data, particularly the Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve's preferred gauge of inflation. The PCE data, set to be released on February 28, is expected to provide insight into the broader economic landscape, including rising inflation and potential stagflation concerns. Stagflation—characterized by slow economic growth coupled with high inflation—has traders on edge, particularly as labor market conditions continue to weaken.

Despite concerns, some analysts remain hopeful that the market may weather stagflation better than expected. According to Mosaic Asset's latest report, historical data shows that the S&P 500 typically posted positive returns during stagflation periods. However, lower interest rates, which many traders were hoping for, are unlikely to materialize before July, despite the Federal Reserve’s upcoming meetings.

4. Gold Soars, Bitcoin Struggles

While Bitcoin remains trapped in its narrow trading range, gold is having a breakout year. The precious metal continues to set new all-time highs, benefiting from its status as a global safe haven asset amid rising geopolitical tensions and trade policy concerns. On the other hand, Bitcoin's performance has been relatively stagnant, despite the broader economic uncertainties that typically favor assets like BTC.

Gold’s recent performance has been impressive, with its price up approximately 24% since July 2024. This rise has occurred despite a strong US Dollar and higher yields on 10-year Treasury notes, which would typically pressure gold prices downward. Analyst Charles Edwards from Capriole Investments noted that gold's strength could signal a similar breakout for Bitcoin in the coming months, as historically, Bitcoin has often followed gold's upward momentum with its own surge.

5. Volatility Metrics Suggest Major Market Moves Ahead

Bitcoin’s low volatility is becoming a topic of increasing concern among traders. Realized volatility, a key metric that measures the standard deviation of market returns, has dropped to near-historic lows. Onchain analytics firm Glassnode highlighted that Bitcoin’s one-week realized volatility had collapsed to 23.42%, a level rarely seen in the past four years. Historically, similar periods of compressed volatility have been followed by significant market movements, signaling that Bitcoin could experience a sudden shift in either direction.

At the same time, implied volatility for Bitcoin options has also fallen to multi-year lows, suggesting that traders expect little movement in the short term. However, the long-term outlook remains more uncertain, with volatility metrics for longer timeframes (such as three to six months) still elevated.

6. Declining Network Activity and Investor Sentiment

Bitcoin's network activity and overall sentiment continue to decline, and some analysts are warning that this could have long-term implications for price action. The number of active wallet addresses has dropped since the US presidential election, and some analysts are comparing this to earlier market corrections, such as the dip seen in September 2023.

Additionally, the accumulation rate for Bitcoin ETFs has slowed, and minor capital outflows have been observed. The decreasing number of unspent transaction outputs (UTXOs) suggests that investor interest may be waning, raising concerns that we could see an exodus of investors similar to the peak of the 2017 bull run. If these trends continue, it could signal a further downtrend for Bitcoin in the coming weeks.

Conclusion

Bitcoin’s path forward remains uncertain as it faces multiple headwinds, from tightening liquidity and low volatility to broader economic concerns surrounding inflation and stagflation. With $90,000 support in sight and market sentiment faltering, traders are looking for signs of strength to avoid a deeper pullback. However, Bitcoin’s price action could take a sharp turn depending on how it reacts to key support levels and the incoming US inflation data. For now, Bitcoin remains in a waiting game, and much will depend on how these factors play out in the days ahead.