Bitcoin Price Gears Up for $120K After Moody’s U.S. Downgrade

Key Insights:

• Bitcoin price stalls near $106K as supply cluster halts further upside.
• Moody’s U.S. downgrade triggers risk-off mood, Treasury yields spike.
• Traders eye $108K breakout for renewed Bitcoin price discovery.

Bitcoin (BTC) price traded above $104,500 on May 19, briefly recovering 2.5% from earlier lows. However, traders flagged resistance near $106,600 as a major obstacle to further upside.

Data from TradingView showed BTC/USD bouncing from the day’s low but struggling to maintain momentum. The bounce followed intense volatility over the weekend, with bulls losing control soon after a fresh weekly close.

Popular trader Daan Crypto Trades noted that BTC continued to fluctuate between $102,000 and $106,000.

“These mark the local range low and high,” he posted on X. “Price has not sustained above or below either level for more than a day.”

Glassnode Flags $106.6K Bitcoin Price Supply Wall

Onchain analytics firm Glassnode identified a crucial Bitcoin price level just below $106,600, where 31,000 BTC remain unspent.

“The supply cluster originated on Dec. 16 and remains unshaken,” the firm stated. “Holders haven’t redistributed, nor averaged down, making $106.6K an important level to watch.”

The presence of this concentrated cost basis has placed downward pressure on price, creating a supply wall. Glassnode’s BTC heatmap showed that the $106.6K level continues to act as a magnet for volatility.

Analyst Rekt Capital commented, “This is exactly what Bitcoin needs to be doing.” He said Bitcoin price must hold the $104,400 support to successfully retest its breakout zone.

Moody’s Downgrade Reshapes Risk Landscape

Bitcoin price’s struggle at key resistance coincided with a historic U.S. credit rating downgrade. Moody’s downgraded the United States from Aaa to Aa1 on May 16, citing unsustainable debt.

Federal deficits are expected to rise from 6.4% of GDP in 2024 to 9% by 2035. Meanwhile, interest payments could consume 30% of federal revenue by 2035, up from 18% today.

Following the downgrade, U.S. Treasury yields spiked. The 10-year yield opened at 5.53%, while the 30-year yield hit 4.98%. This marked the highest yield levels since Oct. 2023.

The Kobeissi Letter noted that, unlike the 2011 S&P downgrade, which triggered a 35% drop in yields, Moody’s action led to a surge, similar to the 2023 Fitch downgrade.

Bitcoin Price Faces Short-Term Risks

Trader Roman warned of growing bearish divergence on weekly charts. “Not a good close,” he wrote on X, highlighting rejection at resistance and low-volume price action. “Too many bearish signs to ignore.”

He added that Stochastic RSI had topped, suggesting a short-term momentum reversal. His caution echoed broader concerns about weakening bullish control near resistance zones.

Still, others remained optimistic about the future trajectory of Bitcoin price. For context, Merlijn The Trader dismissed the pullback as a shakeout, tweeting: “They shook the tree. Now the rocket’s back on track. $BTC target: $116K.”

Bitcoin Price Must Clear $108K for Breakout Confirmation

The current debate centers on whether Bitcoin can break above $108,000, a level increasingly considered a price discovery trigger.

CryptoWZRD called it the “final wave,” suggesting Bitcoin price is realigning after a correction. “Once $108,000 is broken, $120,000 is inevitable,” he wrote.

Researchers Axel Adler Jr. observed cautious behavior among short-sellers despite the macro headwinds. “Traders betting on price declines have been significantly more cautious than in 2021,” he noted.

He added that while risk-off sentiment hurts high-volatility assets, Bitcoin’s “digital gold” narrative could provide support amid rising distrust in fiat systems.

Dollar Weakness May Reinforce Bitcoin’s Long-Term Thesis

The U.S. Dollar Index (DXY) hinted at a potential dip below 100, a signal of dollar weakness. Historically, such moves support Bitcoin price and gold as alternative stores of value.

Gold rose 0.4% in response to the downgrade, reflecting a modest safe-haven pivot. Bitcoin, often dubbed “digital gold,” could benefit in a similar fashion if macro instability persists.

Still, analysts remain divided on near-term direction. Until BTC clears $108K with conviction, short-term volatility will likely continue to dominate price action.