Will bulls take charge now that Bitcoin price trades above a long term trendline resistance?

On October 4-5, Bitcoin (BTC) took another step through the $20,000 mark, taking the price above a long-term downtrend line that dates back to October 22 April or November 15, depending on one’s technical analysis style. .

Some traders might feel a little celebratory now that the price is trading outside of the downtrend line, but have enough relevant macro metrics or factors changed to support a bullish view on Bitcoin price?

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

BTC/USDT. Source: TradingView

In terms of direction, 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 closed the day with gains of 2% to 3%.

BTC, ETH and S&P 500 correlations. Source: CoinMetrics

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

“Correlations between BTC, ETH and the S&P 500 have increased recently as the benchmark has traded down to 3600, which has not been breached since December 2020.”

Despite the Oct. 4 “full recovery” in stocks and crypto markets, heightened fears of global inflation, rising interest rates and other economic concerns continue to dampen investor appetite for engaging with the markets, a fact that is clearly reflected in the third quarter. results

Return on assets for Q3 2022. Source: CoinMetrics

On October 5, OPEC announced plans to cut oil production by 2 million barrels per day, which is roughly 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 gasoline prices.

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

All in all, inflation remains high around the world, corporate earnings expectations are being adjusted downward, and the FED appears confidently committed to its current plans to reduce inflation.

None of these developments are conducive to increasing investor risk sentiment, and given Bitcoin’s correlation with equity markets and sensitivity to the flow of bearish economic news, it seems unlikely that BTC will break above the downtrend line. a sign of a change in trend.

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