Bitcoin’s $100K Breakout Pause: Liquidity and Nvidia’s Stalled Rally to Blame

Bitcoin’s (BTC) recent attempt to break the $100,000 mark has faced a significant pause, with the price remaining locked between $90,000 and $100,000 for the third week running. Despite a brief spike to six figures on Dec. 5, the breakout seems to have lost steam, leaving traders wondering what’s holding back further upward momentum. The answer, according to experts, lies in two key factors: slowed liquidity growth and the cooling of Nvidia’s (NVDA) rally, which has had a notable correlation with Bitcoin’s performance.

Let’s take a closer look at what’s going on and what could trigger Bitcoin’s next move.

Slowed Liquidity Growth Slows Bitcoin’s Momentum

One of the major factors contributing to Bitcoin’s recent struggle to maintain momentum above $100,000 is the slowdown in liquidity inflows. A key indicator, the market liquidity impulse index, tracks metrics like stablecoin mints, inflows into Bitcoin ETFs, and changes in futures market parameters. According to data from 10x Research, this liquidity indicator has dropped significantly, with the weekly rate of change halving to $7 billion from over $15 billion seen earlier in November.

Markus Thielen, founder of 10x Research, pointed out that the slowdown in liquidity growth could be one of the main reasons why Bitcoin is struggling to sustain levels above $100,000. With less liquidity entering the crypto market, the bullish momentum that had previously pushed Bitcoin to new highs has been stifled.

Stablecoins, which are cryptocurrencies pegged to external assets like the U.S. dollar, play a crucial role in driving purchases of Bitcoin. Similarly, ETFs and cash-settled futures are popular ways for investors to gain exposure to Bitcoin without owning it outright. As liquidity from these channels slows down, Bitcoin’s ability to maintain high price levels is also restricted.

The Cooling of Nvidia’s Rally: A Crucial Influence on Bitcoin’s Price

Another, perhaps more overlooked, factor affecting Bitcoin’s price action is the slowdown in Nvidia’s (NVDA) rally. As the world’s largest chipmaker, Nvidia has become a key player in the AI and tech sectors, especially since the launch of ChatGPT in late 2022. Bitcoin and Nvidia have shown a strong correlation, with both assets bottoming out at the end of 2022 and rising together throughout 2023.

In fact, analysts at TheMarketEar suggest that Bitcoin has followed Nvidia’s trajectory, with both assets benefiting from a similar psychological “winners like winners” effect. As Nvidia surged, Bitcoin did as well, catching up with the tech giant’s strong uptrend. This correlation, which had remained positive for most of 2023, has been impacted by Nvidia’s cooling off since mid-November.

As of writing, the three-month correlation between Bitcoin and Nvidia was 0.6. While Bitcoin has risen by an impressive 130% this year, Nvidia has outperformed it with a 172% gain, according to TradingView data. However, Nvidia’s recent price action has shown signs of exhaustion, and analysts are now watching for potential bearish reversal patterns, such as a heads and shoulders formation.

Is Bitcoin Ready for Another Shot at $100K?

Despite the cooling of Nvidia’s rally, there is hope that Bitcoin could make another push toward the $100,000 level. Experts suggest that the market has returned to healthier leverage levels, which could allow Bitcoin to make another attempt at breaking through the $100,000 mark. However, this will depend heavily on two factors: liquidity inflows and broader risk sentiment in the market.

Bitcoin has shown remarkable resilience this year, with a 130% increase in value, but it needs a steady stream of liquidity to maintain its upward trajectory. Additionally, if Nvidia’s price momentum picks up again or if other risk assets begin to rally, it could provide the boost that Bitcoin needs to break through its current price range.

Conclusion: Waiting for the Next Breakout

Bitcoin’s struggle to maintain levels above $100,000 is primarily due to the slowdown in liquidity growth and the cooling off of Nvidia’s rally. While both assets are driven by similar market psychology, Bitcoin will need new liquidity inflows and broader positive sentiment from risk assets to sustain a breakout above $100,000. For now, traders will continue to watch for signs of a fresh influx of capital and any new catalysts that could propel Bitcoin back into bullish territory.