Bitcoin Technical Indicator Suggests Low Probability of ‘Santa Rally’

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.