Will Bulls Take Charge Now That Bitcoin Price Is Trading Above Long-Term Trendline Resistance?

On October 4th and 5th, Bitcoin (BTC) took another step through the $20,000 mark, bringing the price above a long-term descending trend line that stretches all the way back to April 22nd or November 15th, depending on the style of technical analysis. .

Some traders may be feeling a little celebratory now that prices are trading outside the descending trendline, but have any relevant metrics or macro factors changed enough to support a bullish view for the Bitcoin price?

In reality, the BTC price has simply “consolidated” through the trend line by trading sideways where the price has been between $18,500 and $24,500 for the past 114 days.

Directionally, Bitcoin and Ether (ETH) tend to trade in tandem with stocks, and BTC’s Oct. 4 rally to $20,365 comes as the Dow, S&P 500, and Nasdaq ended the day with 2% to 3% gains.

As a reminder that short-term price action does not necessarily reflect a larger trend change, Coin Metrics said:

“Correlations between BTC, ETH and with the S&P 500 have increased recently as the benchmark fell in price to 3600, which had not been breached since December 2020.”

Despite the Oct. 4 “all-in rally” in equities and crypto markets, heightened fears of global running inflation, rising interest rates and other economic concerns continue to dampen investors’ appetite to interact with the markets, a fact clearly reflected in Q3. results.

On October 5, OPEC announced plans to cut oil production by 2 million barrels per day, equivalent to about 2% of global oil demand. Oil stocks rose on the announcement, but the White House is likely concerned that the cuts will complicate the Federal Reserve’s fight against inflation and possibly contribute to higher gas prices.

In general, institutional investors such as CITI and Goldman Sachs expect equity market volatility to continue, and both have revised down their year-end targets for the S&P 500, while investors still predict a down year in 2023.

All told, inflation remains high across the globe, corporate earnings expectations are being adjusted to the downside, and the Fed appears confidently resolute in its current plans to reduce inflation.

None of these developments help boost investors’ risk sentiment, and given Bitcoin’s correlation with stock markets and sensitivity to bearish economic news flow, it seems unlikely that BTC breaking through the descending trend line is a sign of a trend change.

A more compelling development would be a range break and a series of daily bars above $25,000.