This is an analysis post by CoinDesk analyst and chartered market technician, Omkar Godbole.
bitcoin recovered to around $121,500 after falling below $120,000 on Thursday night. Greater benefits may be difficult to achieve or may be short-lived for two reasons.
Firstly, momentum indicators on short-term charts have turned bearish. On the hourly chart, the 50, 100, and 200 candlestick SMAs have aligned bearishly, now stacked below each other – a classic bearish setup. Furthermore, the pattern of consecutive lower highs points to weakening buying pressure.
Second, key ETFs are signaling a sense of risk aversion.
The iShares iBoxx High Yield Corporate Bond ETF (HYG) broke below its uptrend line from May lows and fell below its 50-day SMA for the first time in six months.
As HYG owns high-yield (“junk”) corporate bonds, a bearish trend in this case typically reflects investors’ growing aversion to risk, with investors moving away from riskier, lower-rated bonds.
While BTC is often called digital gold, it has historically been correlated with stocks, reflecting a broader sentiment of market risk.
Meanwhile, in the financial sector, the Financial Select Sector SPDR Fund (XLF), which tracks major banking stocks, has lost momentum since late August and appears to be forming a rounded top pattern that suggests a bear market. Similarly, the Regional Banking ETF (KRE) has also broken below its uptrend line established since April.
Key levels
BTC’s bearish technical setup on short duration charts, coupled with caution in key bank and bond ETFs, indicate a market environment leaning towards risk aversion.
Immediate support for BTC is considered $120,000, followed by $118,000. A move above $124,000 would weaken the case for a deeper pullback.
