Bitcoin (BTC) has had its worst daily performance since September when the BTC price fell 10% on November 16 to below $ 59,000. On the other hand, the US dollar jumped to its best level in sixteen months after using it in the US retail trade, despite persistent concerns over COVID-19 and inflation.
The BTC price set an intraday low of around $ 58,600 on Coinbase, but then withdrew again to raise $ 60,000 in psychological support. The inconvenience came when US President Joe Biden signed the $ 550 billion infrastructure bill into law, including new tax reporting requirements for cryptocurrency users.
Stronger segmentation data
Meanwhile, the dollar continued its dominant upward movement as US retail sales rose 1.7% in October, up from 0.4% last month. This is further evidence – after an excellent report on non-farm jobs last week – that the US economy is recovering strongly from the COVID-19 declines.
As a result, investors raised dollar rates, expecting the Federal Reserve to accelerate a $ 120 billion-a-month cut in its asset purchase program, leading to an earlier-than-expected rate hike that has been close to zero since March 2020.
U.S. The Dollar Index (DXY), which measures the US currency against a basket of major foreign currencies, reached an intraday high of 95,821 on November 16, the highest level since July 2020. However, the price of Bitcoin has risen. categorically against the decay of the good. The level of the environment will decrease through 2020 and 2021.
DXY weekly price chart. Source: TradingView
More profit for the dollar in the future
Analysts had expected the dollar to continue to rise in the coming months, with market analyst Scott Melker predicting the DXY to reach 97.50.
Melker’s optimistic forecasts were based on the “double bottom” attitude.
In detail, a double bottom occurs when the price forms two bottoms at a similar horizontal level to represent a possible bullish reversal. Bullish confirmation comes when the price breaks above a certain resistance level – the top point between two bottoms – to reach a level with a length equal to the maximum height of the pattern.
So it looks like the US Dollar Index has emerged from a similar double-bottom setup as shown in the chart below.
The daily DXY price chart has a double bottom layout. Source: Scott Melker, TradingView.
Bitcoin is fighting against mixed views
Bitcoin has more than doubled its price in 2021 due to growing fears of inflation. Nigel Green, CEO of DeVere Group, indicated that the cryptocurrency may continue to rise in value until at least the second quarter of 2022, marking the recent rise in the US Consumer Price Index (CPI) to a thirty-year high.
He noted that “these latest US data will only exacerbate global inflation concerns as price pressures increase around the world,” adding:
“During this inflation period, Bitcoin surpassed gold, which has almost universally been hailed as the best inflation hedge – so far.”
Daily BTC / USD price chart. Source: TradingView
Vijay May, head of the cryptocurrency exchange Luno Asia-Pacific in Singapore, characterized Bitcoin’s ongoing correction as a “healthy withdrawal”, especially after prices have risen more than 175% YTD to $ 69,000.
“It would be unusual to continue to grow without adjustments,” he said.
On the other hand, Joel Krueger, a currency analyst at LMAX Group, said that tighter Fed policies would begin to affect the broader market, hitting more risky assets, causing Bitcoin and the rest of the cryptocurrency market to fall against the dollar. ladder.
On the topic: Bitcoin will reach a peak of $ 253K, Ethereum up to $ 22,000 in this cycle if bullish halving is repeated in 2016.
Martha Reyes, head of research at digital asset company Bequant, also called Bitcoin a “risky investment”, saying that when times are tough, people want to raise money from their most lucrative assets.
At the time of writing, Bitcoin is trading at $ 60,625.