This is a technical analysis post by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoins three-week rally appears vulnerable to a reversal as the Nasdaq, Wall Street’s technology-heavy index, hit a wall last week, hinting at potential trouble ahead.
Since hitting $80,000 lows on November 21st, BTC has steadily bounced above $90,000, creating higher lows and highs in a countertrend rising channel within the broader downtrend.
The rally appeared to have legs as the dollar index fell after Wednesday’s Fed rate cut, and a longer-term 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 on Friday to nearly $88,000 on Sunday before stabilizing around $89,600 at press time.
BTC ended last week with a bearish candle consisting of 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-rally” dominance at highs.
This pattern, along with the Nasdaq’s stalled recovery from November lows, raises concerns of a deeper BTC decline toward $80,000.
The Nasdaq fell nearly 2% last week, forming a bearish engulfing candle that reversed the previous week’s gains. Coupled with a bearish MACD on the weekly timeframe, it signals potential downside volatility that could spill over to BTC given their strong positive correlation, especially pronounced during NDX’s downtrends when BTC often extends the hit, as Wintermute recently noted.
Another yellow flag for risk-asset bulls is the MOVE index, which measures the 30-day implied volatility of US Treasuries.
The MOVE index set a reverse hammer candle last week. This candlestick pattern, emerging after a prolonged downtrend as in the case of MOVE, is considered to represent an early sign of bullish revival.
In other words, the MOVE index could be heading higher as a sign of increased volatility in government bonds, which tends to cause financial tightening worldwide and limit gains in risk assets. Historically, BTC has tended to move in the opposite direction of the MOVE index.
Key levels
All things considered, BTC seems more likely to break down from the countertrend channel than higher, opening the door for a retest of the recent $80,000 lows.
On the upside, clearing $94,000-$95,000 is needed to regain short-term bullishness, although strong resistance awaits from $96,000 to $100,000, including the 50-day SMA and the Ichimoku cloud.
