Bitcoin’s remarkable rally took a breather this week as the BTC/USD forex pair pulled back sharply, dropping to 116,000 after peaking at a year-to-date high of 123,288. This correction, driven by technical and fundamental factors, raises the possibility of a deeper decline toward the key support level at 110,000. 

Traders are now closely analyzing price action and macroeconomic influences, especially amid the ongoing Crypto Week and increased institutional activity. Fletrade’s expert team dives deep into this subject in their latest publication.

Technical Analysis: Shooting Star Signals Bearish Reversal

On the daily chart, the BTC/USD pair formed a shooting star candlestick, a well-known bearish reversal pattern that often signals the end of an uptrend. The shooting star appeared after Bitcoin reached overbought levels and faced resistance at 123,000, a level where previous bullish momentum began to fade.

This candlestick pattern coincides with mean reversion, where an asset that has moved significantly above its moving average tends to pull back toward it. In Bitcoin’s case, the price is still well above the 50-day moving average (MA50), currently at 108,180, signaling a high probability of further decline toward equilibrium.

Another technical driver of the decline is the attempt to retest the breakout point of the cup-and-handle pattern, a bullish formation that preceded the recent surge. The neckline of this pattern is situated at approximately 110,000, making it a critical support zone to monitor. A successful retest could provide a new base for bulls, while a breakdown below it could trigger a larger selloff.

Despite the recent drop, the broader trend remains bullish unless the pair decisively breaks below 110,000. A recovery above 123,288 would invalidate the bearish thesis and confirm continued upward momentum.

Profit-Taking and Sentiment Shift

Part of Bitcoin’s retracement can be attributed to profit-taking after a strong multi-week rally. Many short-term traders booked gains near resistance, especially as uncertainty emerged around macro developments and regulatory news.

The retracement is occurring amid Crypto Week, a significant moment in U.S. politics where several crypto-related bills are under discussion. The market is awaiting clarity, which has led to short-term caution among traders despite the broader optimism.

Institutional Demand Still Strong

Despite the recent decline in price, Wall Street demand for Bitcoin remains robust. Spot Bitcoin ETFs, led by BlackRock’s iShares Bitcoin Trust, continue to attract significant inflows. In 2025 alone, spot ETF inflows have surpassed $52 billion, underscoring strong interest from institutional investors.

The iShares Bitcoin ETF (IBIT) now manages over $85 billion in assets, making it BlackRock’s most successful fund and putting it in direct competition with GLD, the world’s largest gold ETF. This suggests Bitcoin is increasingly seen as a digital store of value, especially amid growing concerns about fiat currency debasement and macroeconomic instability.

Still, this institutional demand hasn’t been enough to prevent the short-term correction, reinforcing the idea that technical resistance and market sentiment can outweigh fundamentals in the near term.

Inflation and Fed Policy Expectations

Another critical factor influencing BTC/USD is U.S. economic data, particularly inflation figures. The most recent report showed that the core Consumer Price Index (CPI) rose 0.2% month-over-month in June, which was softer than expected.

This release has implications for the Federal Reserve’s monetary policy, potentially increasing the chances of a rate cut later in the year. A more dovish Fed would be supportive of risk assets like Bitcoin, as lower interest rates reduce the opportunity cost of holding non-yielding assets.

However, traders appear to be awaiting confirmation from the Fed before making bold moves, which could explain the wait-and-see approach currently being taken by large market participants.

Conclusion: Key Levels to Watch

The Bitcoin market is at a technical crossroads, with the recent shooting star pattern pointing to a possible decline toward 110,000. This zone is vital, not just because of its technical significance as a support level but also due to its alignment with broader market psychology and historical patterns.

If the BTC/USD pair successfully holds above 110,000, bulls may regain control and attempt another push toward 123,000 and beyond. Conversely, a drop below this threshold could invite additional selling pressure, opening the path to the 108,000 region, aligned with the 50-day moving average.

With institutional inflows, regulatory developments, and macro data all contributing to the complex picture, traders should remain vigilant. For now, the bearish signal from the shooting star candlestick, combined with overbought technicals and investor caution, suggests a potential short-term retracement before any significant bullish continuation.