This is a technical analysis post by CoinDesk analyst and Chartered Market Technician Omkar Godbole.
Bitcoin is down but not out after Federal Reserve Chairman Jerome Powell’s latest hawkish remarks, which challenged expectations of a December interest rate cut.
That’s the message from the price chart, which shows that while BTC faces selling pressure, likely in response to Powell downplaying further easing in December, prices still remain above the critical 200-day simple moving average (SMA) near $109,250. At the time of writing, BTC changed hands at $111,000, rejecting the key moving average.
Staying above the 200-day simple moving average (SMA), a long-term barometer of market trend, is encouraging for the bulls, but is it enough? The likely answer is no.
That’s because prices remain well below the Ichimoku cloud, a widely used technical indicator that helps gauge short-term market trends. Traders generally view trading under the cloud as bearish in the short term.
The longer bitcoin remains under the cloud, the greater the risk of a breakdown below the 200-day SMA, which would open the door for a drop below the psychologically important $100,000 level. That’s exactly how things played out in February, leading to a more pronounced decline in the following weeks, with prices dropping to $75,000.
This downside risk is compounded by two factors: the bullish crossover of the dollar index’s 50- and 100-day SMAs, which suggests continued USD strength ahead 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 signaled by consecutive weekly candles. Hardening of interest rates 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 again trading at a 4%-5% volatility premium on the front end, according to data source Amberdata. It indicates strengthening fear of downside.
Taken together, these factors advise caution for bitcoin bulls, with a crucial break above the $116,000 Ichimoku cloud needed to restore bullish confidence and set the stage for further gains.
