This is an analysis article by CoinDesk Analyst and Certified Market Technician Omkar Godbole.
Bitcoin rebounded to around $121,500 after falling below $120,000 late Thursday. Further progress may be difficult to achieve or may prove short-lived for two reasons.
First, momentum indicators on the short-term charts have turned bearish. On the hourly chart, the 50, 100, and 200 candle simple moving averages (SMAs) have aligned bearishly, now stacked one below the other – a classic bearish setup. Additionally, the trend toward consecutive lower highs indicates weakening buying pressure.
Second, major ETFs signal risk aversion.
The iShares iBoxx High Yield Corporate Bond ETF (HYG) has broken below its uptrend line from May lows and slipped below its 50-day SMA for the first time in six months.
Since HYG holds high-yield (“junk”) corporate bonds, a downward trend generally reflects increasing investor aversion to risk, as investors move away from riskier, lower-rated bonds.
Although BTC is often referred to as digital gold, it has historically correlated with stocks, reflecting broader sentiment of risk in the market.
Meanwhile, in the financial sector, the Financial Select Sector SPDR Fund (XLF), which tracks major banking stocks, has lost momentum since late August and appears to be forming a rounded top-shaped trend suggesting a bear market. Likewise, the Regional Banking ETF (KRE) has also fallen below its uptrend line established since April.
Key levels
BTC’s bearish technical pattern on the short charts, coupled with caution towards major bond and banking ETFs, indicates a market environment skewed toward risk aversion.
Immediate support for BTC stands at $120,000 followed by $118,000. A move above $124,000 would weaken the case for a deeper pullback.
