This is an analysis post by CoinDesk analyst and Chartered Market Technician Omkar Godbole.

Bitcoin BTC$121,419.65 bounced back to around $121,500 after dipping below $120,000 late Thursday. Further gains may be difficult to achieve or could prove short-lived for two reasons.

First, momentum indicators on short-term charts have turned bearish. On the hourly chart, the 50-, 100-, and 200-candle simple moving averages (SMAs) have aligned bearishly, now stacked one below the other – a classic bearish configuration. Additionally, the pattern of consecutive lower highs points to weakening buying pressure.

Second, key ETFs are signaling a risk-off sentiment.

The iShares iBoxx High Yield Corporate Bond ETF (HYG) has broken below its bullish trendline from May lows and slipped beneath its 50-day SMA for the first time in six months.

As HYG holds high-yield (“junk”) corporate bonds, a downtrend here typically reflects rising investor aversion to risk, with investors moving away from riskier, lower-rated bonds.

While BTC is often called digital gold, it has historically correlated with stocks, reflecting broader market risk sentiment.

Meanwhile, in the financial sector, the Financial Select Sector SPDR Fund (XLF), which tracks major banking stocks, has lost momentum since late August and appears to be forming a rounding-top pattern suggestive of a bear market. Similarly, the regional banking ETF (KRE) has also broken below its bullish trendline established since April.

BTC’s bearish technical setup on short duration charts, coupled with caution in key bond and banking ETFs, indicate a market environment leaning towards risk aversion.

The immediate support for BTC is seen at $120,000 followed by $118,000. A move above $124,000 would weaken the case for a deeper pullback.