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Bitcoin may not be able to build on the relief rally as it heads into the end of the year, a key technical indicator that’s flipped bearish amid heightened macro risks indicates.
“The weekly MACD is on a ‘sell’ signal for the first time since April, increasing risk into year end,” Katie Stockton, founder and managing partner of Fairlead Strategies, said in a weekly research note shared with CoinDesk on Monday. There is room for a further sell-off to a point where the asset starts looking oversold in the intermediate term, she wrote.
The MACD (moving average convergence divergence) histogram is a technical indicator used to identify trend reversals and trend strength.
The indicator’s dip into negative territory implies a bullish-to-bearish trend change. Deeper bars below the zero line indicate strengthening of bearish momentum.
The previous bearish crossover confirmed in late April was followed by consecutive weekly losses of more than 10% that saw the price of bitcoin drop to $30,000 from $58,000.
While bitcoin has bounced almost 20% from Saturday’s low of under $43,000, the cryptocurrency has yet to retake the bullish trendline from July lows breached last week.
According to Stockton, the bounce could be fleeting with upside likely to be capped around resistance at $55,000. Lingering Fed jitters, Omicron fears and China property market concerns indicate limited upside in the short term.