Bitcoin (BTC) is again lacking clear directional bias, but may soon pick up a strong bid against ethereum and other altcoins, according to intermarket analysis.
The leading cryptocurrency is now trading in sideways around $6,400 (price as per Coinbase) for the eighth day running, and is struggling to find buyers – despite having charted a bullish inverted hammer last week near the key support of $6,000.
While the absence of a positive follow-through to last week's bullish pattern is a slight cause for concern, it is still too early to adopt the bearish view because prices are holding well above the strong 21-month exponential moving average (EMA) support of $6,121.
Further, BTC is still trapped in a narrow range of $6,360 and $6,480. Hence, the immediate outlook remains neutral.
However, BTC could shine against ETH and other altcoins as the ETH/BTC pair – a risk barometer – is looking south, indicating risk aversion in the cryptocurrency market.
As many alternative cryptocurrencies are built on the ethereum blockchain, the ETH/BTC pair serves as a good indicator of risk sentiment – that is, rising ETH/BTC means risk-on and falling ETH/BTC means risk-off.
A risk-on period is characterized by an increased demand for perceived high-risk cryptocurrencies and BTC tends to depreciate against ETH in such a market. Conversely, during risk aversion, money is rotated out of altcoins and into BTC, leading to a drop in the ETH/BTC exchange rate.
So, a bearish technical setup on ETH/BTC could be considered an advance indicator of impending risk aversion and an increased flow of money from altcoins to BTC.
BTC is currently close to the lower edge of the sideways channel (now at $6,360). A drop below that level would open the doors to the 21-month EMA of $6,120.
If the bulls can pull it off, though, a move above the upper edge of $6,480 could allow a rally to last week's high of $6,810.
As can be seen, the ETH/BTC pair fell below 0.031994 BTC (Sept. 25 low) on Oct. 11, adding credence to rising wedge breakdown witnessed on Sept. 25.
The pair has repeatedly failed to get back above the former support-turned-resistance of 0.031994 BTC in the last 10 days, bolstering the already bearish setup.
As a result, ETH will likely find acceptance below Oct. 18 low of 0.030924 BTC in the next day or two and slide toward the falling channel support of 0.029395 BTC.
Disclosure: The author holds no cryptocurrency assets at the time of writing.