Bitcoin is looking south after erasing three-quarters of the price rally seen in October. The bearish mood comes as the U.S. equities market is soaring in the opposite direction.

The top cryptocurrency by market cap is currently trading at $8,070 on Bitstamp, down 22 percent from the October high of $10,350. With the pullback, BTC has erased nearly 75 percent of the sudden surge from $7,293 to $10,350 witnessed in the two days to Oct. 26.

Bitcoin’s inability to capitalize on the breakout into five figures and the subsequent drop to $8,000 has been associated with the lack of positive catalysts. Moreover, prices had jumped above $10,000 reportedly on hopes that BTC, being a leading cryptocurrency, would benefit from China’s push toward wide blockchain adoption.

While bitcoin has dropped by more than $2,000 in the last 3.5-weeks, the U.S. stock market has put on a sterling show, as seen in the chart below.

The S&P 500 index rose to a record high of 3127.6 on Tuesday, having found acceptance above the psychological resistance of $3,000 last week. Notably, the index has rallied for six straight weeks, possibly in response to the Federal Reserve’s expansion of its balance sheet, as suggested by popular analyst Sven Henrich/Northman Trader.

The Fed has added more than $270 billion to its balance sheet since Sept. 11 and currently has around $4.04 trillion worth of assets, according to Federal Reserve Bank of St. Louis. Fed Reserve Chairman Jeremy Powell has repeatedly said that the ongoing bond purchases are aimed at normalizing the money markets, which went ballistic in September and pushed the overnight rate as high as 10 percent.

Analysts and investors, however, are of the opinion that the Fed has embarked on round four of the quantitative easing (QE) program, as discussed last month. Under a QE program, the central bank buys government bonds to infuse liquidity into the economy and lower interest rates to boost growth.

Looking forward, the S&P 500 may trim recent gains in the short term, courtesy of renewed China-U.S. political tensions. China’s foreign ministry on Wednesday threatened retaliation to the U.S. Senate’s decision to pass legislation aimed at safeguarding human rights in Hong Kong amid a crackdown on the pro-democracy protest movement.

The crypto market community believes BTC is a risk-off asset. The cryptocurrency, however, does not have a credible story as a haven asset, as recently pointed out by CoinDesk’s Galen Moore, and may find little love amid the U.S.-China political tiff.

That said, If China retaliates by devaluing the yuan (CNY) significantly, BTC may pick up a bid on hopes of increased demand from the world’s second-largest economy.

Such rallies, however, seldom last. For instance, BTC jumped 7 percent on Aug. 5 as CNY slipped beyond 7 per USD. The cryptocurrency, however, topped out above $12,300 on the following day and fell back to $9,400 by the end of August, even though CNY continued to slide and hit a multi-year low of 7.1842 on Sept. 3.

Further, the technical charts indicate BTC could extend the recent decline to key support near $7,700.

Daily and 3-day charts

The series of lower highs and lower lows seen on the daily

chart indicate the path of least resistance is to the downside.

The MACD histogram is printing deeper bars below the zero line, signaling a strengthening of bearish momentum. The 14-day relative strength index (RSI) is also reporting bearish conditions with a below-50 reading.

The RSI on the three-day chart is also hovering below 50 and

the MACD histogram is teasing a bearish crossover below zero.

BTC, therefore, looks set to test $7,850 – the 38.2 percent Fibonacci retracement of the rally from $3,122 to $13,880.

Monthly chart

BTC has dropped to $8,000, as expected, having failed to hold on to gains above the descending (bearish) 10-month moving average (MA) earlier this month. Major support is now seen near $7,700 (ascending 10-day MA).

The RSI on the 4-hour chart (not shown) is reporting oversold conditions. Hence, a minor bounce to $8,400 may be seen before a slide to $7,700.

The short-term outlook would turn bullish if prices print a high-volume UTC close above the descending trendline hurdle on the daily chart , currently at $8,460.