Bitcoin's price is currently experiencing a period of compression, leading to speculation about a potential breakout toward $120,000. Technical analysis suggests that this compression phase often precedes a significant expansion.

Current Market Situation

Bitcoin (BTC) traders have been in a standoff, with sellers capping price increases around $112,000 and buyers defending dips to the $107,000-$108,000 range. While some analysts are concerned about Bitcoin's struggle to maintain prices above $112,000 and frequent returns to range lows, the range compression, indicated by higher lows and lower highs on 4-hour and daily charts, could signal a positive development.

Compression Before Expansion

Technical analysts often anticipate "compression before expansion," as volatility decreases and prices consolidate following a major market movement. The recent sell-off on October 10, which saw a 50% drop in BTC open interest, exemplifies such a market event.

Positive Developments

Despite the current price action, positive developments suggest that Bitcoin may eventually return to the $120,000 price level. On Tuesday, spot Bitcoin ETFs saw inflows of $477 million as the BTC price rose from $107,500 to $114,000. Data also reveals that spot buyers across various order sizes on Binance and Coinbase exchanges have been actively buying throughout the $101,500 to $114,000 range. Glassnode's Bitcoin Accumulation Trend Score currently stands at 0.924, indicating that larger entities are accumulating Bitcoin.

Technical Analysis

On the daily chart, Bitcoin's price is trading between the middle and lower Bollinger Bands, around $108,600. The narrowing Bollinger Bands often signal an impending volatility burst. Key technical levels to watch include support around $105,000-$106,000 and resistance at $111,000-$112,000.

Potential Scenarios

• Bullish Scenario: A close above $112,000 could pave the way for $115,000-$118,000. A confirmed breakout above $118,700 might lead to $120,500 and potentially $124,000.
• Bearish Scenario: A breakdown below $105,000 could drag BTC toward $100,000-$95,000. If support at $117,000 collapses, the price could fall back to $114,600 or even test levels around $110,000.

Market Sentiment

Market sentiment remains divided. While long-term bullish structure holds, near-term sentiment is cautious. The Doji candle near $117,000 suggests indecision but also the potential for reversal if macro or volume catalysts emerge.

Factors Influencing Bitcoin's Price

Several factors could influence Bitcoin's price in the near future:

• ETF Inflows: Continued inflows into spot Bitcoin ETFs could drive demand and push prices higher.
• Macroeconomic Events: Upcoming U.S. macroeconomic calendar events and Federal Reserve decisions could impact market sentiment and Bitcoin's price.
• Regulatory Clarity: Progress in digital asset regulation in Washington could unlock new capital and reduce policy-driven volatility.
• Broader Market Sentiment: Risk-off sentiment in broader markets, as reflected in the performance of stocks, gold, and treasury yields, could also affect Bitcoin's price.

Conclusion

Bitcoin is currently in a period of price compression, with technical indicators suggesting a potential breakout. Whether Bitcoin will explode toward $120,000 depends on a combination of factors, including ETF inflows, macroeconomic events, regulatory developments, and overall market sentiment. Traders should closely monitor these factors and key technical levels to anticipate Bitcoin's next major move.