This is a technical analysis article by Omkar Godbole, CoinDesk Analyst and Chartered Market Technician.
Bitcoin’s A three-week price rally appears vulnerable to a reversal as Wall Street’s tech-heavy Nasdaq bottomed last week, signaling trouble ahead.
Since hitting a low of $80,000 on November 21, BTC has steadily rebounded to over $90,000, making higher lows and highs within a counter-trend ascending channel within the broader downtrend.
The recovery appears to be sustainable as the U.S. dollar index fell following Wednesday’s Fed rate cut and long-term trend indicators suggest a possible bullish shift in Bitcoin momentum.
However, these failed to trigger a sustained rebound. Conversely, BTC fell back from $93,000 on Friday to nearly $88,000 on Sunday before settling at around $89,600 at press time.
BTC closed last week with a bearish candle with a long upper shadow, indicating rejection above $94,000, and a small red candle with a negligible lower shadow. This classic rejection pattern signals waning bullish momentum and the dominance of “sell on the dip” at the highs.
This pattern, coupled with the stalling of the Nasdaq’s rebound from November lows, has raised concerns about BTC falling further towards $80,000.
The Nasdaq fell nearly 2% last week, forming a bearish engulfing candle, reversing the previous week’s gains. Coupled with the bearish MACD on the weekly time frame, it signals potential downside volatility that could reach BTC, as they have a strong positive correlation, especially during downtrends in NDX, when BTC often magnifies hits, as Wintermute pointed out recently.
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 had an inverted hammer candle last week. This candlestick pattern occurs after a long-term downtrend, as in the case of MOVE, and is considered to represent an early sign of a bullish recovery.
In other words, the MOVE index could move higher as a sign of rising volatility in U.S. Treasuries, which tends to lead to a global financial tightening and limit returns in risk assets. Historically, BTC has tended to move inversely to the MOVE index.
critical level
All things considered, Bitcoin seems more likely to break out of the countertrend channel than move higher, opening the door to a retest of the recent $80,000 lows.
On the upside, $94,000 to $95,000 will need to be cleared to resume short-term bullishness, although there is strong resistance between $96,000 to $100,000, including the 50-day moving average and the Ichimoku Cloud.
