On October 4 and 5, Bitcoin (BTC) took another step across the $20,000 mark, raising the price above the long-term descending trend line that extends until April 22 or November 15, depending on the technical analysis technique. .
Some traders may feel a little festive now that prices are trading outside the bearish trend line, but have any relevant macro metrics or factors changed enough to support a bullish view of Bitcoin price?
In fact, the price of BTC simply “consolidated” through the trend line through sideways trading as the price has been between $18,500 and $24,500 over the past 114 days.
BTC/USDT. Source: TradingView
Directionally, Bitcoin and Ether (ETH) tend to trade side by side with stocks, with BTC’s Oct 4 rally coming in at $20365 while the Dow, S&P 500 and Nasdaq ended the day with 2% to 3% gains.
BTC, ETH, and S&P 500 correlations. Source: Coin Metrics
As a reminder that short-term price action does not necessarily reflect a larger change in trend, Coin Metrics said:
“The relationship between BTC and ETH and with the S&P 500 has increased recently with the record price dropping to 3600, which has not been breached since December 2020.”
Despite the October 4 “mass rally” in the stock and cryptocurrency markets, mounting concerns about persistent global inflation, rising interest rates and other economic concerns continued to dampen investors’ willingness to engage with the markets, a fact that is clearly reflected in the third quarter. Results.
Asset performance in Q3 2022. Source: Currency Metrics
On October 5, OPEC announced plans to cut oil production by 2 million barrels per day, equivalent to about 2% of global oil demand. Oil stocks rose on the announcement, but the White House likely feared the cuts would complicate the Federal Reserve’s fight against inflation and possibly contribute to higher gas prices.
In general, institutional investors like Citi and Goldman Sachs expect continued stock market volatility, and both have revised their year-end targets for the S&P 500, while investors still expect a decline in 2023.
Finally, inflation remains high worldwide, corporate earnings expectations are revised to the downside, and the Federal Reserve appears confidently assertive in its current plans to cut inflation.
None of these developments are helping to boost investor sentiment towards risk, and given Bitcoin’s correlation with stock markets and sensitivity to bearish economic news flows, it seems unlikely that BTC’s breakout of the downtrend line is a sign of a trend change.
The most convincing development would be a range break and a series of daily bars above $25,000.