The U.S. dollar index (DXY) reveals signs of a short-term peak while the Bitcoin price (BTC) shows hints of a short-term rebound.
There is a story that the price of Bitcoin always coincides with a decrease in the value of the currency.
Since stores of value, such as gold and bitcoin, are valued against the dollar, technically, the downtrend in the DXY will definitely have a positive effect on the price of the BTC.
Bitcoin retakes $50,000 again
As the dollar began to consolidate, Bitcoin broke above $50,000 on March 3, putting it on track to retest the $51,600 resistance level once again.
Over $51,600, there’s no opposition up to $56,000. Thus, breaking through this stage is key to securing upside traction in the short term.
Bitcoin Jack, a semi-trader who expected the $3,600 bottom in March 2020, said:
“Considering it’s very likely to see a $1.9T stimulus package approved within the next 2 weeks, my best guess is dollar is topping out here. Could be wrong, but structure looks very similar to previous consolidation as well.”
If Bitcoin starts to surge as the dollar stagnates, BTC could gain from two macro factors at the same time.
First of all, the dollar’s fall naturally favours Bitcoin. Second, an eventual US $1.9 trillion stimulus could act as a spark for a larger BTC rally thus diluting the value of the dollar.
Bitcoin undoubtedly slumped in the past week due to the shaky macro environment, when the dollar started to increase and bond yields grew to a high annual peak.
If the macroeconomic conditions were the key cause for Bitcoin’s downfall, now that bond yields are easing, BTC’s momentum could bounce in the coming weeks.
Was $42.9K the local bottom?
According to John Cho, the director of global expansion at Ground X, in the near future, $42,900 was most likely the local bottom for Bitcoin.
Cho expected a short-term decline in Bitcoin earlier, predicting a decrease to about $40,000 to $41,000. BTC did not sink too low, but plummeted to sub-$43,000, almost completing a 30 percent decrease from its local peak. Cho said:
“As of the now, 42.9k seems to have been the (local) bottom. Either way, glad the bulls are back in control.”
Although $44,000 was a big support stage, Bitcoin’s fast rebound to $51,000 indicates that the decline itself was a deviation.
In technical analysis, the term variance refers to whether the asset temporarily decreases or increases above the main level, and then returns to the mean.
Following the strong recovery of Bitcoin, it is crucial for the dominant cryptocurrency to re-test the $56,000 resistance region. Above it, the road to a new all-time high is open, making $60,000 the next possible goal.
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