Bitcoin Tests Critical Support as Treasury Premium Collapse Triggers Investor Capitulation
Market Structure Shifts Lower
- Bitcoin lost 13.7% last month, with prices falling to $89,675, as panic-selling hits corporate treasuries.
- Indicators suggest room for a relief rally, with its 14-day Relative Strength Index (RSI) reporting oversold conditions at 45.4, and the Average Directional Index (ADX) noting some directional strength (trend strength 31.6).
- The $81,694 level is capping losses for the time being, with resistance clustered between $97,773 and $103,083.
The recent aggressive weakness could be attributed to tightening regulatory concerns, including India’s cryptocurrency ban, Turkey’s coming restrictions, and the U.S. Federal Reserve and Treasury’s challenges to the fintech’s arms-length supervision of the Dealer Financial Stability Oversight Committee. Recent price action has also suffered since Coinbase Global Inc.’s warranties on coin purchases vaulted above the premium year since its direct listing and on the growing onslaught of other cryptocurrencies, included Facebook’s Libra, which is now rebranded Diem. The technical divergences in the weekly and especially monthly charts are worrying midterm holders that market flows are depleting.
| Metric | Value |
|---|---|
| Asset | BITCOIN (BTC) |
| Current Price | $89674.91 |
| Weekly Performance | -1.41% |
| Monthly Performance | -13.68% |
| RSI (Relative Strength Index) | 42.9 |
| ADX (Average Directional Index) | 31.6 |
| MACD (MACD Level) | -2410.10 |
| CCI (Commodity Channel Index, 20-period) | -0.99 |
RSI at 45.4 Signals First Neutral Reading Since October Accumulation
The weekly RSI is essentially recharged after dragging bitcoin out of the depths of the 2018 bear market, leaving plenty of room for the eventual parabolic advance to continue. Stepping back from the charts, the macro candle paint also remains overwhelmingly positive following August’s jaw-dropping engulfing candle close that is showing few signs of being a bull trap.
What is interesting to note is the performance of RSI amidst the selling pressure caused by the Galaxy Event. Rather than capitulating to well-oversold sub-30 levels, the indicator managed to find support around 45, a level at which smart money was absorbing sell pressure during the October consolidation. This situates RSI in a more balanced position and for swing traders, sets the stage for tradable entries in both directions. The lack of any extremes signals that we have not yet hit a point of inflection. The monthly time frame complicates the picture further, with RSI settled at 44.5. This confirms that momentum has yet to register an exhaustion signal in the larger time frames.
ADX at 31.6 Confirms Moderate Downtrend Without Panic Extremes
Trend strength measurements show a more mixed image than your usual capitulation occasion with the ADX entry at 31.6 pointing to the fact that, while sellers are in charge, they haven’t arrived at the required washout levels north of 40 for an earnest trend to be exhausted. In other words, this is orderly distribution and not a panic liquidation — an important difference for the likes of Strive fighting off MSCI index deletion and legislative tailwinds from Indiana in Bitcoin retirement fund adoption.
In the past, corrections of similar scale have been followed by final flush moves. These took place after the Average Directional Index (ADX) readings rose above 35. With the ADX currently just below this level, the conditions are right for a one final downswing, which could be the case if the key support at $81,694 is breached. For day traders, this means more of the same, so be ready for further short-term swings. For swing traders, it’s time to start adding to positions on the way down, especially if the ADX approaches 35-40.
20-Day EMA at $91,709 Becomes First Resistance After December Support Break
Looking ahead, as mentioned previously, Bitcoin must reclaim the 20-day EMA before any upside momentum can be entertained. It’s likely that a 20-day EMA retest would become a potential resistance target if Bitcoin breaks it in the short term. Losses beyond the 20-day EMA likely see BTC retest the range EQ around $89,500. A reclaim of the level would offer bulls a chance to set up an intraday breakout above the 20-day EMA.
When we look deeper into the moving average structure, the 50-day EMA at $93,836 is the following substantial resistance, around 4.5 percent above the current spot price. This level blocked two attempts to rally in the previous five sessions, meaning that it can be considered as a pivot point. The 200-day EMA is all the way down to $67,527, providing long-term hodlers with psychological support more than anything else, considering it is 25 percent below the current spot price. The previously tested resistance of $91,709 is now a straining level for the bulls to capture if any substantial recovery should form.
Resistance Clusters Between $97,773 and $103,083 as December Highs Loom
There are strong resistances above the current price that are located at significant technical levels as well as important psychological levels. The resistance region goes from $97,773 (the weekly R1) to the key $100,000 level. This is where the failed December breakouts also met the overly optimistic new longs. The so-called “air pocket” is made when technical resistance meets emotional resistance, which is left when recently entered longs suddenly abandon.
Bulls are defending several support levels with much more tenacity than the treasury premium melt-away thesis would suggest. The monthly S1 at $81,694 has now been tested three times over the past week, with each subsequent bounce-back slightly weaker, but holding for the time being. Below that, the $80,052 level is the last line in the sand for a move into the monthly S2 low $76,000s.
The market structure is a spring that is forming between support at $81,694 and resistance at $97,773. This $16,000 range may sound wide, but for Bitcoin, it’s a relatively tight 20% band that is compressing the price action into a decision point. The repeated holding of support while warnings of capitulation from Galaxy and threats of removal from the MSCI index have not yet derailed price higher suggests that there may be accumulation occurring under the hood, and a potential for a squeeze in either direction once this range decides.
Bulls Require Daily Close Above $91,709 to Shift Momentum
If the $91,709 region remains elusive for more efficient technical opportunities, anticipate a deeper retreat toward the $88,632 inflection point. Violating this level leaves the setting more susceptible to a slip into the $87,211-$86,729 zone and could give rise to an extended correction that targets the 38.2% Fibonacci retracement at $85,531.
If we break and hold the monthly S2 during the first session of the month, history shows that the monthly S4 would be the subsequent target ($53,142). That being said, the market structure remains immense.
Considering the recent breakout of the descending channel, the downside consolidation seems more likely as a bullish continuation preparation, with a target range of low to mid $100k based on the channel’s landing point in the final days of March. If it were to resolve as a bullish consolidation pattern, a minimum target would be $125,000.
