Bitcoin price enters descending channel and loses rally could turn $60,000 into resistance

Bitcoin (BTC) appears to lack the strength to retest the all-time high of $67,000 reached on Oct. 20, making investors question whether the bullish moment is over. Even if the price faces these hurdles, it is too early to call the $58,000 support level the start of a descending channel.

One of the factors limiting gains is regulatory uncertainty in the United States. There are "no easy answers" for the agency to provide clear rules, said Anne Termine, a partner in Bracewell LLP's government enforcement and investigations practice and a former chief defense attorney at the Commodity Futures Trading Commission (CFTC).

On the other hand, increasing adoption has been forcing traditional banks to seek out cryptocurrency product offerings. For example, major Russian private bank Tinkoff, owner of a large online brokerage service, is working on a cryptocurrency-related investment service, despite the Bank of Russia’s refusal to launch such a service.

This week, the Coinbase exchange became the most downloaded app in the US Apple Store, which is shocking. Coinbase beat out tech giants like TikTok, YouTube, and Instagram, and that's no small feat. Coinbase was first listed on the App Store in 2014 and became the most popular download in the US in 2017 and May 2021.

Professional traders frustrated but bullish

To determine how bullish or bearish a professional trader is, the contango - also known as the "basis" - should be monitored.

The indicator measures the difference between the longer-dated futures contract and the current price on spot market exchanges. In a healthy market, expect an annualized premium of 5% to 15%, known as contango.

This price gap is caused by participants asking for more money to delay settlement. Whenever this indicator weakens or turns negative, a red flag appears, known as "backwarding."

Note that a sharp drop from a test of resistance at $58,000 on Oct. 27 resulted in the annualized futures contango hitting its lowest level in three weeks. Still, the indicator has recovered nicely to its current 17%, marking a moderately bullish reading.

To confirm whether this movement is specific to the instrument, the options market should also be analyzed.

A 25% delta skew comparing similar call (buy) and put (sell) options turns positive when "fear" prevails. This situation reflects the higher price of protective put options than similarly risky call options.

When market makers are bullish, the opposite occurs, causing the 25% delta skew indicator to shift into negative territory. Readings between minus 8% and plus 8% are usually considered neutral.

The 25% delta skew indicator has been oscillating in neutral territory since September 30. The most recent bottom on October 25 was negative 6%, not enough to be considered mildly bullish. However, even Bitcoin’s 12.5% correction from $66,600 on Oct. 21 to $58,200 on Oct. 28 wasn’t enough to scare professional traders.

While there are no bearish signs in the Bitcoin derivatives market, bulls should be concerned about a potential downside channel that began on October 19. If this move is confirmed further, traders should expect $60,000 to act as a resistance level by November 12.

Currently, professional traders are showing no signs of stress, so a correction should not be a problem after a 63% rally in three weeks that led to an all-time high of $67,000 on Oct. 20.