Bitcoin’s death-cross may start to bite
On Friday, bitcoin's price declined markedly, and the daily chart hint at further weakness. The 50/200 daily EMAs death-crossed on 27 January (green ellipse). However, they have lacked angle, and the cryptocurrency has mainly moved sideways (blue arrow). The red 50-day EMA has now diverged away from the black 200-day EMA (black ellipse). If this continues and angle and separation develop, bitcoin's momentum will be biased to the downside.
We note that cryptocurrencies have aligned with risk assets; bitcoin has a correlation coefficient above 70% with stock indexes. In addition, it is closer to the growth side of the market, with a reading of 79% against the Nasdaq.
Therefore, it is no surprise that Fed Chair Powell's comments on Thursday rocked the boat. He affirmed support for moving faster on hiking interest rates to control inflation, reinforcing a likely 50bps move in May. Moreover, the probability for a 75bps increase in June is over 80% as per fed funds futures. These hikes will increase the cost of borrowing and likely dampen the appetite for risk assets. This aggressiveness is a headwind for bitcoin, and if it continues to pressure the cryptocurrency, it will contribute to further EMA deterioration
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.