CoinDesk Indices Trend Indicator Hints at Continued Downturn for Bitcoin, Ether

With one week remaining in May, bitcoin (BTC) is poised to post its first losing month of 2023, down 6.8% thus far. Ether ETH$3,032.76 is flirting with the identical scenario although its month-to-date decline has been a more narrow 0.78%.

Meanwhile, CoinDesk Indices trend indicator for both assets is now signaling trouble for bullish investors.

The CoinDesk Indices trend indicator for bitcoin and ether (BTI and ETI respectively), shows both assets signaling “downtrend,” a departure from their status for the bulk of 2023. Prior backtests of the BTI and ETI show initial downtrend signals preceding subsequent declines of 47% and 60% between April and June 2022.

The downturns reflect the regulatory issues and macroeconomic uncertainties, including the ongoing U.S. debt ceiling impasse, that have spooked investors. Bitcoin and ether surged over the first four months.

The BTI and ETI trend indicators convey the direction and strength of momentum of each asset. Calculated daily, the indicators classify the assets as residing in one of five distinct categories, ranging from “Significant Downtrend to Significant Uptrend”.

A series of moving averages of different durations, and the extent to which shorter averages cross above or below the longer averages underpins the methodology for the indicator’s signals. The move into the downtrend category indicates that bitcoin and ether’s respective five-day moving averages have crossed below longer term averages and remain as such.

BTC and ETH trading volumes continue to be muted, with volumes on Binance falling below their 20-day moving averages for 11 and 17 consecutive days respectively.

The depressed trading volume comes in concert with 19.4% and 28% declines in BTC and ETH’s average true range. The flat trading ranges of both don’t offer much reason for optimism among investors hoping that bitcoin and ether continue their current four-month streak of gains.

With eight days remaining, bitcoin needs to rise approximately 7.5% to finish above the $29,300 level where it traded to begin May. For ether, a less ambitious 1% gain is needed.

Historically, May has been a relatively solid month for bitcoin and ether, with average daily returns of 0.195%, or approximately 1.4% weekly. However, given the amount of time left in May, there may not be enough runway left for bitcoin to finish on a positive note.