Volatility Builds Up for a Breakout: Bitcoin Tests $98,000 Key Resistance, Ethereum Weakness Awaiting Reversal

On February 20, the cryptocurrency market showed a divergence pattern. Bitcoin (BTC) traded within a range of $96,400-$98,300, briefly touching the $97,500 resistance level during the session, indicating that bulls are attempting to regain the $100,000 psychological threshold; Ethereum (ETH), on the other hand, remains under pressure below $2,750, failing to hold above the critical $2,800 support, with clear signs of weakness. On the macro front, the Federal Reserve meeting minutes signaled a possible slowdown in quantitative tightening (QT), providing some breathing room for risk assets, but short-term institutional fund flows are mixed—spot Bitcoin ETFs have recently experienced net outflows, while Ethereum ETFs saw slight inflows. Technical analysis shows BTC is at a critical turning point; breaking above $98,000 could open the upside, while failure to do so warrants caution of a retest of $94,000 support.

1. Market Overview

As of February 20, Bitcoin is quoted around $97,300-$98,300, with a 24-hour increase of approximately 1.5%-1.8%, maintaining a market cap of around $1.93 trillion. Daily price volatility narrowed to $96,400-$98,700, with trading volume shrinking compared to previous days, indicating market waiting for new catalysts. Ethereum's performance remains relatively weak, quoted around $2,680-$2,750, unable to hold above the key psychological level of $2,800, with a significantly larger decline this month compared to Bitcoin.

Market sentiment indicators, such as the Fear & Greed Index, have rebounded from last week's panic zone to around 50, indicating a neutral stance, though investors remain cautious. Notably, stablecoin market cap continues to grow slightly, reaching $225.3 billion, with USDT accounting for 63.19%, reflecting ample off-chain funds ready to support future moves.

2. Macro and Policy Environment: Marginal Improvement in Liquidity Expectations

Fed policy expectations are warming. The Federal Open Market Committee (FOMC) minutes released on February 19 showed multiple officials leaning toward pausing or slowing balance sheet reduction (quantitative tightening) until debt ceiling issues are resolved. This has been interpreted as a signal of potential marginal easing in liquidity, generally positive for risk assets like cryptocurrencies. However, expectations for a rate cut in March have been significantly reduced, and actual policy implementation will depend on inflation data.

Institutional movements are mixed. Strategy (formerly MicroStrategy) recently raised $2 billion via zero-coupon convertible bonds to continue accumulating Bitcoin, now holding 478,740 BTC at an average cost of about $97,255, demonstrating confidence among long-term holders. Meanwhile, spot Bitcoin ETF funds have experienced net outflows—about $71 million on February 18—mainly due to redemptions from Fidelity FBTC and Valkyrie BRRR; in contrast, Ethereum ETFs saw a net inflow of $19 million on the same day, with Fidelity FETH contributing most. This divergence may reflect institutions taking profits on BTC at high levels while rebalancing into ETH on dips.

Regulatory signals remain positive. Montana's House passed the Bitcoin Reserve Bill (HB 429) with a 12-8 vote, allowing digital assets to be included in state reserves, with all Republican votes in favor. Additionally, Hong Kong's Avenir Group disclosed holdings of $599 million in BlackRock's iBIT shares, becoming Asia's largest institutional Bitcoin ETF holder. The Czech central bank governor also publicly suggested that the central bank should study Bitcoin to enhance expertise and proposed establishing a test investment portfolio. These developments indicate that, despite short-term price volatility, institutional adoption trends are deepening.

3. Technical Analysis: Key Levels in a Tug-of-War to Determine Short-term Direction

Bitcoin: Triangle Consolidation Nearing Breakout

From a technical perspective, BTC is currently at the end of a converging triangle pattern between $96,000 and $98,000. Key support levels are at $95,500 (S1) and $94,300 (S3), with resistance levels at $96,900 (R1), $97,300 (R2), and $98,000 (R3). On the daily chart, price has moved above the middle Bollinger Band, and MACD is near the zero line, indicating a balance of bullish and bearish momentum.

Notably, Bitcoin has broken above a short-term downtrend line. Economies technical analysts suggest that a break above $98,000 would confirm a bullish pattern, with the first target at the $100,000 round number. Conversely, if it fails to stay above $97,500, a pullback to test support at $95,000 is possible, with an extreme downside target of $92,000-$93,000 for stronger support.

Ethereum: Weakness Persists, Watch $2,600 Support

ETH's technical pattern is more fragile than BTC. It has broken below the critical $2,800 support and has not successfully turned it into support, currently trading in the $2,650-$2,750 range. On February 15, it touched a low of $2,900, with limited rebound strength. ETH/BTC continues to underperform Bitcoin, indicating that the "altcoin season" signal has yet to appear.

Downside risk points to $2,600 as a key support; losing this level could open the door to $2,400-$2,500. On the upside, ETH needs to reclaim $2,800 first, then challenge the psychological $3,000 level. Volume analysis shows increased trading activity recently, often accompanied by falling prices, suggesting persistent selling pressure.

4. Trading Strategies: Manage Positions, Wait for Confirmation

Bitcoin (BTC) Trading Strategy:

Short-term traders: Currently at a critical decision point, recommend range trading. Consider entering small long positions in the $96,500-$97,000 range with a stop-loss below $95,800, targeting initially $98,000. If a breakout occurs, add to longs toward $100,000. If price falls below $95,500 and cannot recover within an hour, switch to short positions with a target of $94,500.

Medium to long-term investors: Based on your previous focus on the $91,000 key level, current price has moved away from that support but hasn't confirmed a new rally. Maintain 30%-40% core holdings, with remaining funds waiting for a breakout above $98,500 or a dip to $94,000-$95,000 for partial re-entry. Given the Fed policy outlook and ongoing institutional accumulation, the medium-term upside remains favorable, but macro risks should be monitored.

Ethereum (ETH) Trading Strategy:

Primarily observe, avoid rushing to bottom-fish. ETH is in a weak phase seeking a bottom, lacking clear stabilization signals. Short-term traders should wait until the price re-establishes above $2,800 or confirm support at $2,600 with volume rebound before considering long entries. For medium-term holdings, limit ETH exposure to 20%-30% of crypto assets, prioritizing BTC, and increase ETH holdings once ETH/BTC stabilizes.

Risk Management:

1. Strict stop-loss: Limit individual trade losses to no more than 2% of capital; control overall exposure within risk tolerance.

2. Monitor ETF fund flows: Keep track of daily net inflows/outflows of spot ETFs, as institutional fund movements are key short-term indicators.

3. Macro event alerts: Stay alert to Fed speeches, US tariff policy developments, and geopolitical risks, which can trigger market volatility.

The market pattern on February 20 shows that cryptocurrencies are in a tug-of-war between improving macro expectations and technical correction needs. The performance at key resistance levels will determine the short-term direction—breakout could trigger a new rally, while resistance may prolong consolidation. Ethereum's weakness reminds us that not all assets move in sync; selective allocation remains crucial.

Based on your previous asset allocation framework, maintaining a "gold + Bitcoin" dual-anchor strategy is still reasonable in the current environment of high uncertainty—gold for risk hedging, Bitcoin for growth potential. Internally, a BTC-dominant, ETH-supplemented allocation structure is recommended, patiently waiting for clearer market signals.

Disclaimer: This analysis is based on publicly available market information and does not constitute investment advice. Cryptocurrency markets are highly volatile; please make decisions cautiously according to your risk tolerance.