This is a technical analysis post by CoinDesk Analyst and Chartered Markets Technician Omkar Godbole.
Bitcoin The decline follows, but is not out of, the latest sharp comments from Federal Reserve Chairman Jerome Powell, which challenged expectations of a rate cut in December.
This is the message from the price chart, which shows that although BTC is facing selling pressure in response to Powell reducing additional easing in December, prices still remain above the important 200-day simple moving average (SMA) near $109,250. At the time of writing, BTC jumped above the major averages to $111,000.
Staying above the 200-day simple moving average (SMA), a long-term barometer of market trend, is encouraging for bulls, but is that enough? The possible answer is no.
This is because prices are well below the Ichimoku Cloud, a widely used technical indicator that helps measure short-term market trends. Traders generally consider trading under the cloud to be bearish in the short term.
The longer Bitcoin remains under the cloud, the greater the risk of breaking below the 200-day SMA, which would open the door to a drop below the psychologically important $100,000 level. Things happened exactly the same way in February, leading to further declines in the following weeks, when prices dropped to $75,000.
This downside risk is reinforced by two factors: the bullish crossover of the Dollar Index’s 50- and 100-day SMAs, which signals continued further USD strength and could lead to a bullish double-bottom breakout, marking the end of the broader downtrend since January.
Meanwhile, the 10-year Treasury yield has risen above 4%, confirming the exhaustion of the downtrend, as indicated by consecutive long losing weekly candles. The hardening of yields at the long end of the curve typically strengthens the dollar and weighs on risk assets.
Note that post-Fed, BTC puts listed on Deribit are once again trading at a 4%-5% volatility premium on the front end, according to data source Amberdata. This is a sign of strengthening of negative fears.
Overall, these factors recommend caution for Bitcoin bulls, with a decisive break above the Ichimoku cloud at $116,000 needed to restore bullish confidence and set the stage for further upside.