This is a technical analysis post by Coindesk analyst and chartered market technician Omkar Godbole.
Bitcoin fell but not following federal Reserve chairman Jerome Powell’s latest hawkish comments, which challenged expectations around a December rate cut.
That’s the message from the price chart, which shows that even though BTC is facing selling pressure likely in response to Powell’s announcement of further easing in December, prices still remain above the critical 200-day Simple Moving Average (SMA) near $109,250. As of writing, BTC changed hands at $111,000, bouncing off the key average.
Holding 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 stay well under the Ichimoku cloud, a widely used technical indicator that helps gauge short-term market trends. Businessmen in general consider 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. This is precisely how things played out in February, leading to a more pronounced decline in the following weeks, when prices slipped to $75,000.
This risk is reinforced by two factors: the dollar’s bullish crossover of the 50- and 100-day SMA, which indicates the continued strength of the USD early and could lead to a bullish double-bottom breakout, marking the end of the broader downtrend since January.
Meanwhile, the 10-year Treasury yield bounced above 4%, confirming the exhaustion of the downtrend, as the sign of consecutive long weekly candles. Hardening yields at the long-end of the curve typically strengthens the dollar and weighs on riskier 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. This indicates strengthening of downside fears.
Taken together, these factors advise caution for Bitcoin Bulls, with a decisive break above the Ichimoku Cloud at $116,000 needed to restore confidence and set the stage for further gains.
