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CoinDesk 2025-02-10 06:48:17

Bitcoin Indicator That Signaled $70K Breakout Turns Bearish as Trump's Trade War Rhetoric Grows

A momentum indicator that presaged bitcoin's (BTC) post-election price surge has now turned negative, coinciding with President Donald Trump's tariff rhetoric, which threatens to destabilize markets. Still, there's no need to panic just yet. That indicator is the moving average convergence divergence (MACD) histogram, which is used to gauge trend strength and changes. It's calculated by subtracting bitcoin's average price level during the past 26 periods (weeks in this case) from the average over the past 12 weeks. The signal line is then calculated as a nine-week average of the MACD and the difference between the MACD and signal lines is plotted as a histogram. The MACD on bitcoin's weekly chart has crossed below zero, which is said to represent a bearish shift in momentum. Meanwhile, crossovers above zero indicate a bullish trend. The indicator turned positive in mid-October, strengthening the case for a rally to $100,000, as CoinDesk reported back then . So, while the latest bearish MACD signal might alarm bulls, especially retail buyers who rely on technical analysis tools, BTC's current price action doesn’t validate the negative reading on the indicator. Currently, BTC remains confined within the broader range of $90K to $100K, with recent movements tightening to a range between $95K and $100K. The directionless trading diminishes the significance of the MACD's bearish crossover. It’s essential to remember that indicators are derived from price action, not the other way around. MACD signals need to be confirmed by price action. The indicator's bullish signal in mid-October was backed by prices breaking out of a multi-month trading range. Tariff threat and surging inflation expectations While the MACD isn't a cause for concern yet, several macro factors warrant attention as potential sources of downside volatility that could see the cryptocurrency test the long-held support near $90,000. A break below that would validate the fresh negative reading on the MACD, confirming a bearish shift in momentum. At the top of the list is Trump's tariff rhetoric, which, if it translates into action, could lead to higher bond yields and lower risk assets. Trump said that on Monday, he would announce 25% tariffs on all steel and aluminium imports, which would come on top of additional metal duties, to be disclosed later this week. Trump has hinted at plans to apply higher tariffs on a wide range of goods imported from the European Union later this month, according to UBS . The University of Michigan consumer sentiment survey released Friday showed that the tariff threat is already adversely impacting consumer expectations about price pressures in the economy. Inflation expectations for the year ahead increased to 4.3% in February from 3.3% in January, the highest reading since November 2023. That could keep the Fed from cutting rates rapidly. "2-year inflation swaps have started to price some risk premium around tariffs. At 2.72%, they have reached new highs. The market is interpreting the Fed to be pretty much on a long pause: growth is holding up okay, and the idea is that even if inflation drops to 2% the Fed doesn't need to be in a hurry to cut," Alfonso Peccatiello, the author of Macro Compass, said on X . The U.S. CPI data, or the consumer price index report for January, is scheduled to be released on Feb. 12.

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