July 16 (Reuters) - Bitcoin, which has halved since the boom that took it above $126,000 last October, has barely moved since February. But, given its highly speculative nature, it is still a good way to gauge risk appetite, making it a handy tool for equity traders whose markets have ballooned or currency traders who have adopted a very defensive stance in spite of the stock market boom.
It's unlikely that both positions — one extremely positive and the other very negative — will be maintained together for long. And bitcoin, which is sitting just above very important levels, may provide some insight as a lead indicator.
The situation looks quite bearish. Once steeply oversold conditions, which halted the October 2025 to February 2026 decline toward $60,000, were alleviated, bitcoin fell further, reaching slightly below $58,000 in June. The lack of a bounce from the low during another oversold situation is a worry, heightening the risk of another drop.
Should the 55-WMA at $89,087 fall below the 100-WMA at $88,425, the sell signal it provides could spark a drop. And should the most widely watched cryptocurrency sink below $57,783, which is 61.8% of the rise from 2023's low near $15,000 to the record high above $126,000, the resulting risk aversion for all cryptocurrencies could influence a broader paring of risk.
Gold stole the headlines when bitcoin slumped last year, rallying over $1,600/oz, likely with traders switching wagers from bitcoin. But it has surrendered all of those gains and also stands just above key levels that, if broken, could trigger a purge of bullish wagers from speculators who have been buying heavily from $4,500 down.
This could force traders to cash in highly profitable equity wagers to fund losses on cryptocurrencies and precious metals. That, in turn, could support the dollar — though the haven buying already seen in 2026 may act as a restraint on further gains for the greenback.
Alternatively, if bitcoin weathers the storm of an imminent sell signal and gold holds around $4,000/oz, currency traders won't need to maintain their defensive stance and may reduce their wagers. Their selling would weigh on the dollar, providing the stimulus — a weaker USD effectively eases U.S. monetary policy — needed to lift bitcoin and gold clear of nearby supports, creating a platform for the resumption of the bull trends that have excited so many traders in recent years.(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
