03 Mar 2021 #Bitcoin
The U.S. dollar index (DXY) is showing signs of a short-term top as the price of Bitcoin (BTC) demonstrates signals of a short-term rally. There is a narrative that the price of Bitcoin often coincides with a drop in the value of the dollar. Since stores of value, like gold and Bitcoin are priced against the dollar, theoretically, a downtrend in the DXY would likely have a positive impact on the price of BTC.
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. Above $51,600, there is little resistance until $56,000. Hence, breaking past this level is critical to secure upside momentum in the short term. Bitcoin Jack, a semi-pseudonymous trader, who predicted the $3,600 bottom in March 2020, said:
If Bitcoin continues to rally as the dollar stagnates, it could allow BTC to simultaneously benefit from two macro factors. First, the dollar’s decline naturally benefits Bitcoin. Second, the impending $1.9 trillion dollar U.S. stimulus could serve as a catalyst for a broader BTC rally while diluting the value of the dollar. Bitcoin likely slumped in the past week due to the shaky macro climate, as the dollar began to climb and bond yields rose to a yearly high.
If the macroeconomic conditions were the major catalyst for Bitcoin’s downturn, now that bond yields are easing, it could bouy BTC’s momentum in the coming weeks. According to John Cho, the director of global expansion at Ground X, $42,900 was most likely the local bottom for Bitcoin in the foreseeable future. Cho earlier predicted a short-term Bitcoin downturn, expecting a drop to around $40,000 to $41,000. BTC did not drop that low, but it declined to sub-$43,000, almost completing a 30% drop from its local high.
Following the strong recovery of Bitcoin, it is critical for the dominant cryptocurrency to retest the $56,000 resistance area. Above it, the path toward a new all-time high is open, making $60,000 the next likely target.
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