Despite the recent sharp decline in the US stock market due to an increase in long-dated US yields, Bitcoin (BTC) has held up relatively well. It is currently trading in the $26,200s, which is a 17% decrease from its yearly high in July above $31,800. However, BTC remains 5% above its earlier monthly lows and is currently holding on to its 21DMA.
Investors are still interested in accumulating Bitcoin in anticipation of next year's halving and the possibility of spot Bitcoin ETF approvals. This has helped keep the BTC price in the upper $20,000s in recent months, but there are indications that it may drop back towards $20,000.
Here are three reasons why this could happen.
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Macro Headwinds Are Building
Bitcoin has experienced a decline of approximately 15% since the beginning of Q3 due to the rise in US bond yields and the US Dollar Index (DXY). The US 10-year yield has reached its highest since 2007 at 4.54%, while the 30-year yield has reached its highest since 2011 at 4.68%. The DXY has also risen to its highest levels since December 2022, exceeding 106. These developments are attributed to the increasing likelihood that the US Federal Reserve will maintain higher interest rates for a longer period to counter inflation, which is expected to remain structurally elevated in the coming years due to the continued outperformance of the US economy. Despite the continued upside in yields and the US dollar, the Bitcoin (BTC) price has stabilized in recent weeks. However, some argue that the cryptocurrency has not fully reflected recent changes in the macro landscape, and a break back to the low $20,000s could occur as a result. Until optimism about a rate-cutting cycle takes the edge off the recent US yield rally, the macro environment is likely to remain a headwind for Bitcoin.
Bitcoin in a Bearish Descending Triangle
Bitcoin has recently been consolidating in a bearish descending triangle pattern, which is generally considered a significant bearish technical formation. If the support level in the $25,000s is breached, it could trigger a wave of technical selling in the near term.
Double Rejection of the 200DMA Plus “Death Cross”
Bitcoin's recent developments regarding its major moving averages have caused concern for those taking a technical standpoint. The cryptocurrency has twice rejected the important level upon retests since breaking below its 200DMA in August, which sends a signal that its medium-term outlook has shifted for the worse. Conversely, Bitcoin's strong rebound from the 200DMA in March was a strong signal of strong medium-term performance. Additionally, Bitcoin experienced a "death cross" this month, where its 50DMA fell under its 200DMA, which is another signal of a bearish shift in the market's medium-term momentum.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.