Bitcoin Price: Why Compass Point’s Crucial $98K Warning Demands Investor Caution

In a significant move for cryptocurrency markets, the U.S. investment bank Compass Point has issued a stark warning to investors, advising extreme caution on buying Bitcoin dips until the digital asset decisively reclaims the $98,000 threshold. This analysis, reported by Decrypt, arrives as Bitcoin experiences heightened volatility, having recently touched $97,500 before retreating below $90,000 in early 2025. The bank identifies this specific price point not as a random number, but as the critical average purchase price for short-term holders, a cohort whose behavior often dictates near-term market momentum.

Decoding the $98,000 Bitcoin Price Threshold

Compass Point’s analysis hinges on a sophisticated understanding of market participant psychology. The firm pinpoints $98,000 as the average cost basis for short-term holders—investors who have acquired Bitcoin within approximately the last 155 days. This group is notoriously sensitive to price swings. Consequently, when the Bitcoin price trades below this average, short-term holders are statistically more likely to sell, potentially creating sustained downward pressure. Conversely, a clean break and hold above $98,000 would signal that these holders are back in profit, potentially stabilizing the market and inviting renewed bullish sentiment.

This framework provides a data-driven alternative to emotional trading. Historically, the aggregate cost basis of short-term holders has served as a robust support or resistance level. For instance, during the 2023-2024 cycle, the 200-day moving average played a similar psychological role. Compass Point’s shift to the short-term holder cost basis reflects the market’s maturation, where on-chain analytics now offer granular insights previously unavailable.

• Short-Term Holder Cost Basis: The average price at which recent buyers entered the market.
• Psychological Resistance: A price level where selling pressure intensifies.
• Sentinel Indicator: Serves as a gauge for overall market sentiment and risk appetite.

The Recent Market Context and Price Action

Bitcoin’s journey toward $100,000 has been fraught with volatility. After a strong rally throughout late 2024, the Bitcoin price faced a formidable rejection at the $97,500 level, just shy of Compass Point’s identified key zone. This failure to break through was followed by a swift correction that pushed values below $90,000. This price action exemplifies the resistance dynamic the bank describes. The rapid sell-off likely involved short-term holders protecting capital or minimizing losses as the price dipped below their aggregate breakeven point.

Market analysts observe that such corrections are healthy in a long-term bull market, but their depth and duration are crucial. The $80,000 level is now watched as a potential higher low, which could establish a new support floor. However, Compass Point cautions that even a dip to $80,000, while a potential buying opportunity for long-term investors, comes with significant caveats. The current market environment remains saturated with leveraged positions, which can amplify both gains and losses, leading to violent, cascading liquidations that exacerbate price moves.

Expert Insight: The Leverage Overhang

The pervasive use of leverage in cryptocurrency trading represents a primary risk factor highlighted by Compass Point. When prices fall, leveraged long positions are forcibly closed by exchanges in a process called liquidation. This automated selling can trigger a feedback loop, driving the Bitcoin price down further and faster than fundamental analysis would suggest. Data from derivatives exchanges in Q1 2025 showed near-record levels of open interest, indicating a market ripe for a volatility spike. Therefore, any dip-buying strategy must account for this technical overhang. Prudent investors may wait for these leveraged positions to be flushed from the system, often indicated by a sharp, high-volume drop followed by a period of consolidation, before committing significant capital.

Strategic Implications for Investors in 2025

For retail and institutional investors alike, Compass Point’s advisory translates into a clear, disciplined framework. The core recommendation is patience. Rather than attempting to “catch a falling knife” during a decline, the bank suggests waiting for a confirmed recovery signal: a sustained Bitcoin price above $98,000 on a weekly closing basis. This approach prioritizes capital preservation over opportunistic gains, aligning with more conservative portfolio management principles that have entered the crypto space.

Furthermore, this analysis underscores the growing importance of on-chain metrics in investment decision-making. Metrics like Net Unrealized Profit/Loss (NUPL), Miner’s Position Index, and exchange flow data provide a foundational layer of insight beyond simple price charts. In 2025, successful cryptocurrency investment increasingly requires synthesizing traditional technical analysis with these blockchain-native datasets. Compass Point’s report exemplifies this hybrid analytical approach, leveraging hard data on holder behavior to inform its price-level warnings.

Conclusion

Compass Point’s advisory on the Bitcoin price presents a nuanced, data-rich case for strategic patience. By identifying the $98,000 level as the critical average purchase price for short-term holders, the bank provides a concrete metric for assessing market sentiment and risk. Until the Bitcoin price reclaims and sustains this level, the path of least resistance may favor caution, as leveraged market structures and holder psychology pose tangible downside risks. For investors navigating the 2025 landscape, this analysis reinforces that disciplined risk management, informed by on-chain data, is paramount in the volatile yet maturing cryptocurrency market.

FAQs

Q1: What is the short-term holder cost basis, and why is it important?
The short-term holder cost basis is the average purchase price for investors who have bought Bitcoin in the last ~155 days. It is crucial because this group is highly reactive to price changes. When the price falls below this average, they may panic sell, creating resistance. When the price rises above it, it can trigger FOMO (Fear Of Missing Out) buying.

Q2: Why does Compass Point warn against leverage during this period?
Leverage magnifies losses. In a volatile correction, highly leveraged long positions get liquidated automatically, creating a cascade of sell orders that can drive the Bitcoin price down much faster and further than fundamentals would suggest, turning a normal dip into a severe crash.

Q3: Is a drop to $80,000 a good buying opportunity according to this analysis?
Compass Point suggests a drop to $80,000 could present a buying opportunity, but with extreme caution. The primary risk is the overhang of leveraged positions that may not yet be fully cleared. The safer strategy, per their report, is to wait for a confirmed reclaim of the $98,000 level, which would indicate a shift in momentum.

Q4: How does this analysis differ from traditional stock market advice?
This analysis is uniquely enabled by blockchain technology. In traditional markets, analysts cannot precisely know the average purchase price of all short-term investors. Bitcoin’s public ledger allows for this precise on-chain calculation, making metrics like cost basis more reliable and actionable.

Q5: What should an investor do if they already hold Bitcoin below the $98,000 average?
The advice is primarily for deploying new capital. For existing holders, the analysis suggests understanding the market context. It may be prudent to avoid adding to leveraged positions and to ensure one’s overall portfolio risk is managed. Long-term holders with a strong cost basis may choose to simply hold through the volatility, a strategy known as “HODLing.”