This is a technical analysis article written by CoinDesk Analyst and Certified Market Technician Omkar Godbole.
Bitcoin is down but not in retreat following the latest hawkish remarks from Federal Reserve Chairman Jerome Powell, which called into question expectations around a December rate cut.
That’s the message from the price chart, which shows that although BTC faces selling pressure likely in response to Powell’s downplaying of 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, bouncing off the key average.
Holding above the 200-day simple moving average (SMA), a long-term barometer of market trend, is encouraging for bulls, but is it enough? The likely answer is no.
Indeed, prices remain well below the Ichimoku cloud, a widely used technical indicator that helps gauge short-term market trends. Traders generally consider trading under the cloud to be bearish in the short term.
The longer Bitcoin remains under the cloud, the greater the risk of a fall below the 200-day SMA, which would open the door to a fall below the psychologically important $100,000 level. This is precisely how things played out in February, leading to a steeper decline in the following weeks, when prices slipped as low as $75,000.
This downside risk is reinforced by two factors: the bullish crossover of the 50- and 100-day SMAs of the dollar index, which portends continued dollar strength and could lead to an upward breakout of a double bottom, marking the end of the broader downtrend since January.
Meanwhile, the 10-year Treasury yield rebounded above 4%, confirming the exhaustion of the downtrend, as signaled by consecutive, long weekly candles. Hardening yields on the long end of the curve generally strengthen the dollar and weigh on risky assets.
Note that after the Fed, BTC puts listed on Deribit are once again trading with a 4-5% volatility premium initially, according to data source Amberdata. This indicates a strengthening of downward fears.
Taken together, these factors prompt caution for Bitcoin bulls, with a decisive breakout above the Ichimoku Cloud at $116,000 needed to restore bullish confidence and set the stage for further gains.
