Bitcoin Faces Crucial Wedge Breakout as Capital Flows Strengthen

Bitcoin trades within a tight wedge near $118,782 and traders expect a breakout as volatility continues to compress sharply.

Capital inflows of $82 billion show strong market support and analysts believe Bitcoin has more room before reaching peak euphoria.

Emotional market cycles show a bull trap and panic phase with traders watching for a break above $122,000 or below $116,000.

Bitcoin is trading at $118,782, showing signs of consolidation as it nears the apex of a tightening wedge pattern. Price action between $109,000 and $123,000 has become increasingly choppy, with recent movements forming a classic bull trap followed by a fear-induced flush

Traders remain divided, yet analysts warn that these emotional swings often precede major moves. The chart patterns and capital flow data suggest Bitcoin is preparing for a significant breakout in the coming days.

Source: Merlijn The Trader

The bull trap, marked near $122,000, tricked traders into thinking a breakout was underway. However, the price quickly reversed, signaling confusion. Bitcoin is still moving inside a wedge defined by converging white trendlines. Resistance holds firm at $121,000, while support hovers near $116,000. This range compresses volatility, often hinting at a breakout on the horizon.

Capital Inflows Signal Market Strength

Glassnode data shows capital inflows remain strong, with over $82 billion entering the crypto market over the past 30 days. This is below the December 2024 peak of $135 billion but still indicates solid investor interest. Besides, realized profits remain positive, showing traders are still in a net gain position.

Source: Ali

Moreover, analysts point out that investor sentiment has not yet reached euphoric levels. Hence, Bitcoin may still have room to rise before hitting a cycle top. Current inflows suggest both institutional and retail players are continuing to allocate capital.

Emotional Cycle Unfolds

Merlijn The Trader notes that Bitcoin's recent moves closely follow the classic emotional market cycle. First came the bull trap, then panic, followed by silence. This pattern often signals that a massive move is near, as uncertainty peaks.

Additionally, the red zone on the chart's bottom right highlights a potential breakdown or support test. Traders are watching for a clear break above $122,000 or below $116,000. Either move will likely define Bitcoin’s next trend.

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