This is a technical analysis post by CoinDesk analyst and chartered market technician Omkar Godbole.
Bitcoin The three-week price bounce appears vulnerable to a reversal, as the Nasdaq, Wall Street’s tech-heavy index, hit a wall last week, hinting at possible trouble ahead.
Since hitting lows of $80,000 on Nov. 21, BTC has consistently bounced above $90,000, making higher lows and higher highs in a countertrend ascending channel within the broader downtrend.
The rally appeared to have strength, as the dollar index declined following Wednesday’s Fed rate cut, and a longer duration trend indicator hinted at a possible bullish shift in BTC momentum.
However, these failed to spark a sustained rebound. Instead, BTC retreated from $93,000 on Friday to nearly $88,000 on Sunday before stabilizing around $89,600 at press time.
BTC ended last week with a bearish candle comprising a long upper wick, indicating a rejection above $94,000, and a small red body with a negligible lower wick. This classic rejection pattern indicates a fading of bullish momentum and a dominance of “selling rallies” at highs.
This pattern, along with the Nasdaq’s stalled rebound from November lows, raises concerns of a deeper BTC slide towards $80,000.
Nasdaq fell almost 2% last week, forming a bearish engulfing candle that reversed the previous week’s gain. Coupled with a bearish MACD on the weekly period, it indicates potential downside volatility that could spill over to BTC, given its strong positive correlation, especially pronounced during NDX downtrends when BTC often amplifies the hit, as Wintermute recently noted.
Another warning sign for risk asset bulls is the MOVE index, which measures the 30-day implied volatility of US Treasuries.
The MOVE index placed an inverted hammer candle last week. This candlestick pattern, which appears after a prolonged downtrend as in the case of MOVE, is considered an early sign of bullish revival.
In other words, the MOVE index may rise as a sign of increased volatility in Treasuries, which tends to trigger financial tightening around the world and limit gains in risk assets. Historically, BTC has tended to move in the opposite direction to the MOVE index.
Key levels
Considering all this, it seems more likely that BTC will fall out of the countertrend channel than rise, opening the door for a retest of the recent lows of $80,000.
On the upside, a breakout between $94,000 and $95,000 is needed to regain near-term optimism, although expect strong resistance between $96,000 and $100,000, including the 50-day SMA and the Ichimoku cloud.
