TL;DR It’s always bearish – until it’s not.

We had some big news this week: on Wednesday CBoE withdrew its proposed rule change to the SEC, which would have allowed it to list shares in the SolidX-VanEck bitcoin ETF.

The long-anticipated ETF has been one of the big hopes for the bitcoin bulls, the belief being that such a retail-friendly on-ramp for money would open the floodgates and power BTC back into an uptrend, and likely to new highs.

A final decision on the ETF was due by 27 February, and there have been suggestions that the ongoing government shutdown meant the understaffed SEC was set to refuse it rather than take the risk of letting it through by default when the deadline passed. A statement from VanEck claims that this is a temporary issue, and that the application will be re-submitted when the government and SEC start up again. Either way, this is a significant development and means, at the very least, another long delay.

What is interesting about this is the market’s response: essentially nothing. Bitcoin made no move around that news that could be considered anything more than background noise.

On Tuesday morning, the day before, BTC did abruptly plummet, dropping from around $3,530 down to $3,401 (Bitstamp): a dramatic fall that looked set to put in a lower low and send bitcoin back down towards the 200 WMA, which we have been saying it is likely to retest. But it was a flash-crash: a single five-minute candle down, which was erased with the next five-minute candle back up. It may have been completely unrelated to the SEC announcement, or it could have been insiders dumping their coins before the news was released (if you like conspiracy theories). Overall, though, the markets shrugged off news that the ETF is on ice.

Does this suggest a bottom is in? Unfortunately not: the big picture is still overwhelmingly bearish. Bitcoin keeps putting in lower highs, is trading below the 50 and 200-day moving averages, is experiencing lacklustre volume and has multiple resistance levels to clear before we can say the downtrend is over.

But is it interesting? Absolutely. Think back to 2017 and the market’s crazy reaction when the first ETF was denied – a massive crash, followed by rapid recovery and then an onward march to the all-time high. That was at a time of huge optimism. In this instance, the news didn’t make so much as a dent in the market. One way or another, the failure of that ETF was already priced in. That must surely be an indication that we’re reaching the despair phase of the market cycle. And when the last weak hands have sold in despair, there’s only one way for the market to go.

So while things look bearish, we know that it won’t last forever. And unless you’re really good at catching knives, you won’t know it’s over until the moment has passed.

Tomorrow we’ll look a little further at what a market reversal looks like.

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