Bitcoin Bear Market Could Be on the Horizon According to These Two Technical Signals
The current outlook for Bitcoin could suggest an impending bear market. Following a significant sell-off in the cryptocurrency market, key technical indicators are driving this sentiment. The correlation with traditional markets has raised concerns, as investors shift their focus towards profit-taking in overvalued tech and AI stocks.
Bearish Technical Signals Emerge
Recent on-chain data reveals that eight out of ten metrics indicate bearish trends. In addition, derivatives and options trading show that traders are increasingly betting on further declines. Notably, Bitcoin has experienced nearly a 14% drop in just one week, currently trading around $91,600 according to CoinGecko.
Critical Price Levels
For any recovery to take place, Bitcoin needs to close above the $105,000 mark. This is contingent on a dovish Federal Reserve and positive economic reports. Analysts point out that the pressure has intensified following Bitcoin’s failure to maintain a weekly close above the 50-week moving average, a level it has not traded below since October 2023.
The Death Cross Indicator
Additionally, the emergence of a “death cross,” where the 50-day moving average falls below the 200-day moving average, signals that short-term momentum is weakening faster than the long-term trend. This pattern often suggests that a bear market is forthcoming.
Market Sentiment and Investor Behavior
- Investor fears are influencing both crypto and traditional markets.
- Open interest in the derivatives market indicates speculation remains high, despite the downtrend.
- Recent data shows a drop in 25-delta skew into negative territory, signaling increased put buying for downside protection.
Nevertheless, analysts observe some signs of market resilience. An increase in funding rates and bid-ask deltas suggests some investors are beginning to buy the dips. However, a continued decline in prices could compel these buyers to exit their positions, exacerbating the downward trend.
Future Outlook
While the near-term outlook appears bleak, there is still a possibility for a rebound if Bitcoin stabilizes above $100,000. According to Farzam Ehsani, CEO of VALR, a strong commitment from the Federal Reserve to reduce interest rates in December, alongside evidence of robust U.S. economic growth, could uplift market sentiment.
However, Ehsani cautions that a decisive breakout above the $105,000 threshold is essential for restoring confidence in a growth trend. Until this occurs, selling pressure is likely to dominate, creating challenges for any recovery attempts.
