This article presents a technical analysis by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoin’s three-week price increase appears susceptible to a reversal as the Nasdaq, a tech-centric index, faced challenges last week, indicating potential problems ahead.
After plummeting to $80,000 on November 21, BTC has progressively risen above $90,000, forming higher lows and highs in a countertrend rising channel amid the larger downtrend.
The rally seemed promising as the dollar index weakened post-Wednesday’s Federal Reserve rate cut, with a longer-term trend indicator suggesting a possible bullish shift in BTC’s momentum.
However, these factors did not lead to a prolonged rally. Instead, BTC fell from $93,000 on Friday to just below $88,000 by Sunday, stabilizing around $89,600 at the time of reporting.
BTC concluded the previous week with a bearish candle featuring a long upper wick, indicating rejection above $94,000 and a small red body with minimal lower wick. This typical rejection pattern suggests diminishing bullish momentum and a prevailing “sell-the-rallies” sentiment at highs.
This pattern, coupled with Nasdaq’s halted recovery from November lows, raises fears of a more significant BTC decline towards $80,000.
Last week, Nasdaq fell nearly 2%, forming a bearish engulfing candle that negated the previous week’s gains. Combined with a bearish MACD on the weekly timeframe, it suggests potential downside volatility that could impact BTC, considering their strong positive correlation, notably during NDX’s downturns when BTC often exacerbates the losses, as Wintermute recently highlighted.
Another warning sign for risk-asset investors is the MOVE index, which gauges the 30-day implied volatility in U.S. Treasury notes.
The MOVE index formed an inverted hammer candle last week. This candlestick pattern, emerging after a lengthy downtrend as in MOVE’s scenario, is considered an early indicator of bullish resurgence.
In essence, the MOVE index may rise as a sign of heightened volatility in Treasury notes, which typically leads to global financial tightening and limits gains in risk assets. Historically, BTC has tended to move inversely to the MOVE index.
Key levels
Overall, BTC seems more likely to break down from the counter-trend channel than ascend, suggesting a possible retest of the recent $80,000 lows.
To regain short-term bullishness, BTC needs to clear the $94,000-$95,000 range, though significant resistance is anticipated between $96,000 and $100,000, which includes the 50-day SMA and Ichimoku cloud.
