Bitcoin (BTC) has seen some short term bullishness now that we have seen the S&P 500 (SPX) close in the green. For most investors this was a sign to get back into the market and they did but they couldn’t close the price above the 200 day EMA. We saw a close below the 200 day EMA and the price attempted to break past the 200 day EMA even today but it failed again and has now declined below that level again. So, this is not a favorable development for Bitcoin (BTC) and other cryptocurrencies because the last time it kept trading sideways like this was when it was just bracing for a sharp decline after facing rejection at the 21 day EMA. If the same happens this time, we are looking at a low $7,000s or even lower levels for the price to decline to.

The price of Bitcoin (BTC) has declined to a large descending triangle and is now on the verge of breaking below it. We might see some upside from here but the big picture points to trouble as it signals major potential downside especially in light of macroeconomic developments. The cryptocurrency market is a very small one and it is not immune to the effects of the stock and bond market. When trouble begins to surface on those markets, it transcends to the cryptocurrency market as it has in the past. Before we delve into that in more detail, let us take a look at the price of Ethereum (ETH). We have seen ETH/USD rally aggressively in the past 24 hours but we are very close to seeing a downtrend begin now. The next move to the downside is likely to be a sharp one and if we see the bear flag come to fruition that could eventually push the price to new lows.

The S&P 500 (SPX) might have closed a day in green but that does not change the macro outlook. We are now very close to seeing a downtrend follow. It is very important to realize that this upcoming downtrend is going to be a lot more brutal as there is more room to decline. We have already seen signs of weakness in the market. Repo rates shot up to 8% in a very small window. Lest we forget, the last financial crisis was accelerated by a repo run and then the Fed had to eventually bail out the banks. There is no denying that banks worldwide are in a lot of trouble and we need to stay focused on such macro indicators to assess the future outlook of cryptocurrencies because the major markets is all that matters. Interest in long term treasury bonds is rising despite lower yields which tell us that investors do not trust what is happening short term. This is alarming for the S&P 500 (SPX) and therefore for Bitcoin (BTC) which is why it is not worth it to be chasing the price of Bitcoin (BTC) to the upside at this point.

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