coindesk.com
This is a technical analysis post by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoin's BTC$89,629.86 three-week price bounce looks vulnerable to a reversal as the Nasdaq, Wall Street's tech-heavy index, hit a wall last week, hinting at potential trouble ahead.
Since hitting $80,000 lows on Nov. 21, BTC has steadily bounced above $90,000, carving higher lows and highs in a countertrend rising channel within the broader downtrend.
The recovery appeared to have legs, as the dollar index declined following Wednesday's Fed rate cut, and a longer-duration trend indicator hinted at a potential bullish shift in BTC momentum.
Yet these failed to spark a sustained rally. Instead, BTC retreated from $93,000 Friday to nearly $88,000 on Sunday before stabilizing around $89,600 at press time.
BTC ended last week with a bearish candle comprising long upper wick, indicating rejection above $94,000 and a small red body with negligible lower wick. This classic rejection pattern signals fading bullish momentum and "sell-the-rallies" dominance at highs.
This pattern, alongside Nasdaq's stalled rebound from November lows, raises concerns of a deeper BTC drop toward $80,000.
Nasdaq dropped nearly 2% last week, forming a bearish engulfing candle that reversed the prior week's gain. Coupled with a bearish MACD on the weekly timeframe, it signals potential downside volatility that could spill into BTC, given their strong positive correlation, especially pronounced during NDX's downtrends when BTC often amplifies the hit, as Wintermute recently noted.
Another yellow flag for risk-asset bulls is the MOVE index, which measures the 30-day implied volatility in U.S. Treasury notes.
The MOVE index put in an inverted hammer candle last week. This candlestick pattern, appearing after a prolonged downtrend as in MOVE's case, is taken to represent an early sign of bullish revival.
In other words, the MOVE index may turn higher as a sign of increased volatility in Treasury notes, which tends to cause financial tightening worldwide and cap gains in risk assets. Historically, BTC has tended to move in the opposite direction of the MOVE index.
Key levels
All things considered, BTC appears more likely to break down from the counter-trend channel than higher, opening the door for a re-test of recent $80,000 lows.
On the upside, clearing $94,000-$95,000 is needed to reclaim short-term bullishness, though heavy resistance awaits from $96,000 to $100,000, including the 50-day SMA and Ichimoku cloud.