Bitcoin's Monthly MACD Turns Bearish Amid Growing Macro Pressures

Bitcoin is currently facing a bearish trend in its monthly Moving Average Convergence Divergence (MACD) indicator, a shift that has historically signaled potential downturns in the cryptocurrency market. This change is attributed to various macroeconomic pressures, such as tightening policies from the Bank of Japan (BOJ), the strengthening U.S. dollar, and outflows from exchange-traded funds (ETFs), which have all affected market liquidity and increased the chances of a deeper decline in crypto assets.

Key Takeaways

Bitcoin's monthly MACD is showing a bearish trend, historically indicating extended downturns.
Heavy liquidations occurred recently, exacerbated by liquidity pressures and extreme bearish positioning from traders.
Macro factors, including rising Japanese bond yields and a strong U.S. dollar, contribute to increased risk in the crypto market.
Technical indicators reveal vulnerabilities in Bitcoin and Ethereum, suggesting a broader market weakness.

Bitcoin monthly MACD chart turning bearish amid macro headwinds

Bitcoin's MACD Indicates Potential Market Decline

The monthly MACD for Bitcoin (BTC) has remained in a bearish state since 2022. Notably, November was marked by the first negative red bar on the MACD histogram, coinciding with a significant drop in Bitcoin’s price. Historical data shows that similar shifts in momentum have often been followed by extended downturns, leading to sharp declines from previous peaks.

In recent days, leveraged traders faced substantial liquidations, with data indicating that significant liquidity levels exist above current prices. According to trading platforms, analysts are noting the possibility of a substantial short squeeze as market positioning has reached extreme bearish levels.

Economic Factors Impacting Bitcoin's Downtrend

The recent decline in Bitcoin's price has coincided with a surge in Japanese bond yields, raising concerns about tighter monetary policy from the Bank of Japan. Increasing funding costs have led to a reassessment of global risk assets, and Bitcoin, being a high-volatility asset, has reacted accordingly. This sell-off occurred during a low-volume overnight trading period, where order books were sparse, leading to increased market volatility.

During this time, the absence of ETF inflows contributed to the market's breach of key support levels. Traders experienced stop-loss orders being triggered and forced liquidations of leveraged positions, further intensifying the sell-off. As Bitcoin's value fell, futures on precious metals rose, signaling inflows into safe-haven assets amid heightened market uncertainty.

Historical Context of the Bearish MACD Crossover

The occurrence of a bearish MACD crossover has historically aligned with significant market cycles since 2012, often resulting in extended price troughs after similar signals. This technical indicator assesses momentum changes between short-term and long-term price averages. A negative reading suggests a potential shift from a bullish to a bearish trend.

Current macroeconomic situations, which include fiscal pressures in Japan, sustained strength in the U.S. dollar, high Treasury yields, and recent outflows from Bitcoin ETFs, have analysts concerned about the possibility of further market volatility.

Technical Analysis and Broader Market Implications

From a technical standpoint, analysts note that the first support level for Bitcoin is near the trendline established by higher lows over the past year. A breach below this trendline could expose Bitcoin to previous lows seen last spring and earlier price peaks.

Additionally, Ethereum (ETH) is showing signs of weakness, notably with a death cross pattern where its shorter moving average has fallen beneath the longer-term moving average. The combined bearish MACD signal from Bitcoin and the technical weakness observed in Ethereum reflects a wider vulnerability across cryptocurrency markets, suggesting that traders should remain cautious in the current environment.