The Correlation Between Bitcoin and Nasdaq
Research from Ecoinometrics highlighted the strong relationship between Bitcoin (BTC) and the Nasdaq index, indicating that Bitcoin’s long-term price recovery is significantly influenced by Nasdaq’s upward trends. This correlation has important implications for investors in the cryptocurrency space.
Bearish Signals Emerge
On Monday, the Nasdaq index triggered a concerning bearish reversal pattern known as a “double top,” which could jeopardize Bitcoin’s support level at its 200-day simple moving average (SMA). This development raises alarms for crypto enthusiasts who were hopeful for a continued upward trajectory.
Bitcoin’s Recent Price Movement
In the past 24 hours, Bitcoin has experienced a notable decline of over 10%, reversing gains made during a rally that saw prices reach approximately $95,000 on Sunday. Today, Bitcoin prices tested the critical 200-day SMA support level at $82,587, as indicated by data from TradingView.
Understanding the 200-Day SMA
The 200-day SMA is a widely recognized indicator of long-term market trends. When the price falls below this moving average, it is often interpreted as a signal of impending significant losses. With the Nasdaq’s decline, the threat of Bitcoin breaching this long-term average becomes more pronounced.
The Double Top Explained
The “double top” pattern consists of two peaks separated by a trough, typically forming over a period of two to six weeks. For this pattern to be valid, the gap between the peaks must be no more than 5%, and the distance from the trough to each peak should be at least 10%. While these are general guidelines, the context in which the pattern appears is crucial; it should manifest after a sustained uptrend, which is precisely what has occurred with the Nasdaq.
Current Nasdaq Performance
Since mid-December, the Nasdaq has created two peaks near the 22,200 mark, with a trough at 20,538. Following its recent drop below this trough, the index has confirmed the double-top bearish reversal pattern, raising concerns about further declines.
Potential Implications for Nasdaq
According to technical analysis, the potential decline for the Nasdaq could reach at least 70% of the distance between the two peaks and the trough, suggesting a possible drop to around 19,400. Historical data indicates a failure rate of 11% for such breakdowns, meaning that deeper losses are likely to occur.
Outlook for Bitcoin
Both the Nasdaq and Bitcoin have lost bullish momentum since December, with both trading close to their respective 200-day averages. If Bitcoin falls below this crucial level, the next support is anticipated at the former record high of $73,757, which has shifted from resistance to support.
In summary, the interplay between Bitcoin and the Nasdaq is critical to watch, especially as bearish patterns emerge that could threaten Bitcoin’s stability. Investors should remain vigilant as these developments unfold.
