This post provides a technical analysis by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoin is experiencing a downturn following Federal Reserve Chairman Jerome Powell’s recent hawkish comments, which have raised concerns about a potential rate cut in December.
This is reflected in the price chart, indicating that despite BTC facing selling pressure likely triggered by Powell’s comments on potential easing in December, prices remain above the significant 200-day simple moving average (SMA) around $109,250. As of this writing, BTC is trading at $111,000, having bounced back from this crucial average.
Staying above the 200-day simple moving average (SMA), a long-term indicator of market trends, offers some encouragement to bulls, but is it sufficient? The probable answer is no.
This is because prices remain significantly below the Ichimoku cloud, a popular technical indicator that assesses short-term market trends. Generally, traders deem trading beneath the cloud as bearish for shorter time frames.
The longer bitcoin stays beneath the cloud, the higher the risk of a decline below the 200-day SMA, which could lead to a drop below the psychologically significant $100,000 mark. This scenario mirrored events in February, resulting in a steep drop in the following weeks, when prices fell to $75,000.
This downside risk is compounded by two elements: the bullish crossover of the dollar index’s 50- and 100-day SMAs, indicating ongoing USD strength ahead and potentially signaling a bullish double-bottom breakout, thus concluding the larger downtrend since January.
Simultaneously, the 10-year Treasury yield has risen above 4%, affirming the end of the downtrend, as indicated by consecutive long-wicked weekly candles. An increase in yields at the long end of the curve typically bolsters the dollar and pressures risk assets.
Keep in mind that following the Fed’s announcement, BTC puts listed on Deribit are once more trading at a 4%-5% volatility premium at the front end, according to data from Amberdata. This reflects growing downside apprehensions.
These various factors urge caution for bitcoin bulls, with a significant breach above the Ichimoku cloud at $116,000 necessary to regain bullish sentiment and pave the way for additional gains.
