This is a technical analysis post by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
A much-watched momentum indicator has flashed red, a warning that has signaled the start of extended bitcoin downturns in all major cycles since 2012.
This indicator is the moving average convergence divergence (MACD) histogram of the monthly chart. The indicator printed the first red bar below the zero line in November when prices fell by over 17%, confirming a bullish-to-bearish trend change.
In other words, the negative reading on the indicator means that the bull run that began around $20,000 in early November has ended and bears have taken over.
Over the years, these so-called bearish crossovers of the monthly MACD histogram have not been kinder to bulls. For example, after bitcoin corrected from approximately $70,000 to $50,000 at the end of 2021, the MACD indicator turned bearish in January 2022, signaling a continuation of the downtrend that ultimately caused prices to fall below $20,000.
Similar patterns emerged after bearish MACD crossovers in both 2018 and 2014, with these signals preceding the deepening of bear markets.
While past results do not guarantee future results, meaning that the latest bearish MACD crossover does not necessarily trigger a downside, the current market environment supports the bearish case.
Several macro risks, including Japan’s fiscal pressures, resilience in the dollar index and government yields despite talk of Federal Reserve rate cuts and recent outflows from spot ETFs, reinforce the negative signal.
The message is simple: Traders must be wary of downside volatility. First support is near $84,500, defined by the trend line connecting the 2023-2024 higher lows. A break would reveal the April low around $74,500, then the 2021 peak near $70,000.
Ether’s outlook is also looking no rosier as it has confirmed a death cross, a bearish pattern marked by the 50-day simple moving average (SMA) crossing below the 200-day SMA. It is a sign of a short-term trend that is underperforming a long-term trajectory, with the potential to develop into a full-blown bear market.
Although the term death cross sounds ominous, its track record as a reliable stand-alone indicator in the ether market has been mixed.
