Why Bitcoin Price Rally Stalled After Robust Run This Week

Key Insights:

• The bullish momentum of Bitcoin price cools after initially kicking off strongly this week.
• Bitcoin exchange inflows are on the rise, signifying more uncertainty and rising sell pressure.
• Bitcoin ETFs close the week with almost $400 million in outflows on Friday.
• Scott Bessent calls out the Federal Reserve over accountability. This may prompt investors to be more cautious.

The first half of January is officially a wrap, and this is ample time to evaluate Bitcoin price performance and the state of demand. The last 7 days were noteworthy because the cryptocurrency kicked off with robust bullish momentum, but it appears to have stalled in the second half of the week.

BTC price rallied by roughly 8.5% from Sunday to its $97,939 peak on Wednesday. The rally triggered optimism that the Bitcoin USD price would push above $100,000 for the first time since November.

The optimism was shattered as Bitcoin cooled slightly in the second half. This meant the cryptocurrency failed to gain enough momentum to reach $100,000.

Despite the cooling demand, BTC price was on track to conclude the week above $95,000 at the time of observation. This means it will close the week in the green by more than 4%.

Bitcoin Price Action Reflects Rising Exchange Inflows

The Bitcoin price action in the second half of the week underscored prevailing uncertainty over its price action. This also aligned with macro factors, such as the 4-year cycle, suggesting that Bitcoin could be in a bear market. Meanwhile, major signals and internal signals suggest that Bitcoin may not yet be near a cycle top.

These factors have been feeding into the existing short-term uncertainty. Exchange inflows, for example, have recently adopted an uptrend. This means BTC holders have been moving their coins onto exchanges, possibly preparing to sell.

The exchange inflows surged to levels last seen in November last year. This observation aligns with higher uncertainty among investors. This may explain why the BTC bullish momentum disappeared halfway through the week. However, there were other potential reasons behind the short-lived rally.

Federal Reserve Accountability Issues Raise Alarm Among Investors

While the market has been struggling to maintain bullish momentum, external factors may also be heavily involved in prevailing investor sentiment. Concerns about the Federal Reserve’s operations might be a key driver of negative market sentiment.

U.S. Treasury Secretary Scott Bessent called out the Federal Reserve during a recent interview. He stated that the FED needs more accountability, hinting at concerns over its operations. Such concerns may push investors to the edge and prompt a more cautious approach, especially toward risk-on assets such as BTC.

The rally in the first half of the week was also accompanied by robust demand from Bitcoin ETFs. The latter collectively registered about $1.4 billion worth of net inflows this week.

Most of those inflows occurred in the first half of the week, thus propping up demand for the cryptocurrency. However, inflows in the second half of the week were overall negative. Bitcoin ETF outflows surged to $394.7 million on Friday.

The spike in outflows on Friday reflected the sudden shift in sentiment in the second half of the week. These observations may signal the absence of follow-up demand.

However, this may be a short-term outcome. Zooming out on the weekly timeframe reveals that demand may accelerate in the next few weeks if market conditions allow.