Bitcoin Tests Support at $89.7K as Momentum Indicators Reset From December Highs
Market Structure Shifts Lower
- Bitcoin failed to secure monthly high gains (down ~13.6%) and was rejected at the $107.4K resistance level.
- The resulting drop triggered systematic selling across crypto strategies and coincided with a US equities sell-off ahead of month-end and quarter-end.
- Bitcoin found support just above its 200-day moving average, holding that level for now.
Bitcoin failed to secure monthly high gains by about 13.6% and was subsequently rejected at the critical $107.4K resistance level. This price action triggered algorithmic or systematic selling across various crypto strategies and also took down a slew of altcoins with it. The drop came as the US equities sold off ahead of the month-end rebalancing as well as quarter-end close. The volatility in the past week or so has once again emphasized the correlation between BTC and stocks, particularly with US’s S&P 500. The good news is all looked to BTC to catch a bid just above the 200-day moving average and it appears to be holding that level for the time being.
The fall might have been exacerbated by news of the largest options expiry coming for Friday, and at least one market maker was said to be offloading BTC positions that were laying off gamma exposure and dynamics. Not to mention President Biden’s administration announcing plans to borrow $1.5T in FY 2023, which means larger weekly auction sizes. Post-tax date, something to keep an eye on is how socialism fits with late-stage capitalism. Last week the Federal Reserve had to step up their U.S. Treasury purchases in the secondary market to keep the rates under control.
Generally speaking it feels as if lots of traders were trying to reduce their size and de-risk into month-end, quarter-end, and options expiry. Immense amount of firepower was swept against this flash crash, tactics applied by digital and bill-on-block money markets when bills and Treasuries flowed out of their warehouse and into the banking system. Find the SOFR, EFFR, and RRP charts to see the offshore holdings and pricing dynamics. Or you can look at the 21-day moving average of US Treasury yields and see where it is versus rates on the 03-month bill series. If we see the swap higher, we know they inverted the curve. And when they inverted the curve it wasn’t attractive for dealers to carry their overnight positions in their custody account so those Treasuries went back to the Federal Reserve.
The capitulation phase might be over though since this pullback saw various altcoins suffer dramatic losses which even if BTC is now oversold indicates people, with little true conviction of what they were holding, were mainly shaken out of speculating positions. The Spent Output Profit Ratio (SOPR) also approached a cycle low, signaling most weak hands were already washed out. ** Can’t argue with the fact the shutter of diverse MMF and STIF is turning out to decumulate a few trillion dollars of an effectively unfinished four-week debt cycle. Once the Treasury ramps up the four-week issuance again, the RRP will be solid well above where the banks invest for the night.
CBDC’s are real money, us regular people will not be able to obtain one directly, and they’re only in circulation for 24-hours of additionality. One CBDC equals +100 basis points on your savings account. Enjoy your deflation. Speaking of savings accounts, banks have to post leverage ratios on each UST issue because the bill series cannot be pledged down in the 1a and 1z wait. This is when the regulators step in and enforce balance sheet caps on commercial banks. Sounds crazy but being forced to hoard cash in the overnight market 6 years after QE started is somehow even worse. Back to whether the bottom is in or not…. Corporate strategists are sitting with $1.44 billion in cash building the largest reserve of dry powder to go hunting, close to one trillion, for potential yield farm. Difference is instead of locking the tokens you have to lock the disc. Has anyone ever had to carry a credit balance in their custody txt account and make the teller’s drawer happy?
Bitcoin dropped 8.7% on April 8, immediately before the U.S. cash market opened; the biggest one-day percentage loss since March. The cryptocurrency closed the session at $90,548, near the intraday low of $89,683.80, then spent the weekend in a narrow range with many markets closed for Good Friday and Easter Monday.
| Metric | Value |
|---|---|
| Asset | BITCOIN (BTC) |
| Current Price | $89770.51 |
| Weekly Performance | -1.30% |
| Monthly Performance | -13.58% |
| RSI (Relative Strength Index) | 43.1 |
| ADX (Average Directional Index) | 31.6 |
| MACD (MACD Level) | -2402.47 |
| CCI (Commodity Channel Index, 20-period) | -0.06 |
Momentum Resets to 45.66 After December’s Overbought Territory
The Relative Strength Index (RSI) is currently at 45.66 on the daily timeframe, which indicates a full reset from the overbought readings above 70 that we saw in December. When RSI is neutral like this it indicates that bulls and bears are relatively evenly matched in terms of momentum. However, it usually takes some time to consolidate after a sharp move from overbought conditions before the market can push higher again. RSI readings at similar levels after a 15% or more correction in the past have typically resulted in 2 to 4 weeks of accumulation.
What is interesting to note is that the RSI behavior matches with the SOPR ratio reaching cycle lows – which means that through these two indicators, it can be assumed that the sales due to despair or the capitulation have used up the downward pressure. For swing traders, RSI readings that are neutral open up the opportunity in both directions, but the market will take time to process the recent volatility shock and various institutional traders will be preparing their $1.44B warchest options for possible entries is currently more advisable to wait.
ADX at 31.64 Confirms Trending Conditions Remain Despite Pullback
When considering a broader market perspective, global equity markets also remain in strong uptrends. The S&P 500 has been trending higher since last October and is still above its 200-day moving average. Emerging markets (EEM) are set to take a breather as they digest a strong rally but the EFA ETF that tracks developed international equities is in a steady uptrend as it rides a rising 200-day moving average. The value rotation persisted last week, and if long-term interest rates can stabilize, international equities may find their footing soon.
In simple terms, the ADX emphasizes that although prices bounced significantly, the base market was not transformed into a sideways and weak state that would annoy trend followers. Traders should adjust by searching for momentum trades on the rebound, rather than countering the trend, as the ADX indicates that the momentum of the market is more likely to continue than stay sideways.
50-Day EMA at $97.8K Becomes Next Resistance After Support Flip
The price action combined with the daily ribbon trends keeps the market scope in a relatively tight range between $86K and $104K with a downside pivot through the 10-day EMA ($90.5K) bringing the $86K level into sharper focus. Buyers continue to defend this area, which has culminated in multiple wicks through this support as noted in the chart above.
The most notable reclaim has been the 20-day exponential moving average (EMA) acting as support the past week, holding the line since the start of the new year. This level caught the consolidation low this week and has been in control considering the pullback never saw a close trade back below the average.
Resistance Stacks Heavy Between $93.9K Monthly Pivot and $97.8K EMA
Sellers have set up strong resistance at various price levels above the current price levels. Bulls must cross these resistance levels if they want to see a solid recovery. The resistance levels include the monthly pivot at $93.9K to the 50-day EMA at $97.8K. This constitutes a difficult $4k resistance barrier, with long positions stuck from the previous December drop.
The underlying support structure looks far more solid given the SOPR cycle low signal, as the December low of roughly $80.5K has held through numerous retests. The monthly S1 pivot of $81.7K adds confluence to that region, with $80K psychological support serving as the level to defend for maintaining a bullish market structure.
The current structure still provides hope for further upside. If bulls can break $93.5K, the next level to conquer would be around $98.5K to $100K, which would shift the whole market into a more bullish sentiment and price development. If they do not, the compression will only increase, and the range low becomes more substantial.
Bulls Need Decisive Close Above $93.9K to Shift Momentum
In order to take back control, the bulls would need to see a daily close above the $93.9K monthly pivot, the level at which proposed outlet of trapped sellers currently resides. This would clear the path to start testing the 50-day EMA once again, which is currently at $97.8K, and the going may well get easier beyond that as momentum will likely quickly turn bullish if this key moving average becomes support once again. The institutional cash reserves and a number of SOPR bottoming signals are fundamentally supporting the recovery propositions.
As long as the price stays under $93.9K, new lows at $80K could be tested. The recent wick low at $80.5K could also trigger more downside liquidity. However, as stated before, the SOPR is at cycle-low levels, making extreme lows less likely. A typical bitcoin correction lands on the S2 monthly pivot at $76.9K – seen as a perfect opportunity for new longs if available.
With the technical reset in momentum indicators and institutional positioning for accumulation, the most likely near-term path has Bitcoin consolidate between $80.5K and $93.9K while building energy for the next directional move. There is $1.44B in sidelined capital, so any sustained break of $80K support is likely to bring significant buying interest, which makes extended downside less probable than continued base-building.
