This is a technical analysis post by Omkar Godbole, CoinDesk Analyst and Chartered Market Technician.
Bitcoin's BTC$89,629.86 Three weeks of price gains look vulnerable to a reversal after the Nasdaq, Wall Street's tech-heavy index, hit a wall last week, hinting at possible trouble ahead.
Since hitting a low of $80,000 on November 21st, BTC has steadily rebounded above $90,000, carving out lows and highs in a countertrend ascending channel within a broader downtrend.
The recovery appeared to have legs, as the dollar index fell following Wednesday's Fed rate cut and long-term trend indicators suggested a possible bullish shift in BTC momentum.
However, these did not lead to a sustained rise. Instead, BTC retreated from $93,000 on Friday to nearly $88,000 on Sunday before stabilizing around $89,600 at the time of writing.
BTC closed last week on a bearish candlestick consisting of a small red entity with a long top and negligible bottom that showed a rejection above $94,000. This classic rejection pattern indicates that bullish momentum is fading and “rally selling” at the highs is predominant.
BTC: Daily and weekly charts in candlestick format. (Trading View)
This pattern, along with Nasdaq's stalled rebound from its November lows, raises concerns that BTC could fall further towards $80,000.
The Nasdaq fell nearly 2% last week, forming a bearish engulfing candlestick that reversed the previous week's gains. Combined with a bearish MACD on the weekly time frame, the strong positive correlation, as Wintermute recently pointed out, points to potential downside volatility that could spill over to BTC, especially during NDX downtrends where BTC often amplifies hits.
This is the weekly chart of the Nasdaq. (Trading View)
Another yellow flag for risk asset bulls is the MOVE index, which measures the 30-day implied volatility of U.S. Treasuries.
The MOVE index entered an inverted hammer candlestick last week. As in the case of MOVE, this candlestick pattern that appears after an extended downtrend is thought to represent an early sign of a bullish resurgence.
Displays the weekly chart of MOVE in candlestick format. (Trading View)
In other words, the MOVE index could turn higher as a sign of increased volatility in Treasury securities, which tends to trigger monetary tightening globally and suppress returns on risk assets. Historically, BTC has tended to move in the opposite direction of the MOVE index.
major level
All things considered, BTC is more likely to break out of the countertrend channel than the high and retest the recent $80,000 low.
On the upside, the pair needs to clear $94,000-$95,000 to regain near-term bullishness, but there is stiff resistance at $96,000-$100,000, including the 50-day SMA and Ichimoku cloud.
