Historically weak US dollar strengthens other assets in sanctuary. By analyzing the connection, one can draw such a conclusion and come to a conclusion about Bitcoin (BTC) and the US dollar.
Bitcoin rose in 2020 as the US Dollar Index (DXY) has had a tough year. But will this momentum continue in the coming months? Let’s take a closer look at the charts.
The triangle exploded as most markets waited for the peak, pushing up to $ 11,700 and breaking through the critical resistance range of $ 11,000 to $ 11,200.
However, to support the bullish momentum, support in this $ 11000-11200 region should hold to test the $ 12000 resistance range.
The weekly chart for Bitcoin illustrates the importance of the $ 12,000 resistance level. Since the bear market started, the $ 12,000 area has been a major obstacle.
This critical barrier has led to many tests in this area. However, there has been no breakthrough yet. But the general consensus is that the more often the level is tested, the weaker it is.
For example, it took silver nearly seven years to overcome the $ 18 resistance.
The breach took a long time as the price of silver constantly jumped off the $ 18 barrier. However, a break of the $ 18 level triggered a massive move, and the rally has continued towards $ 30, an increase of 60% since the break.
But while this is not much for cryptocurrency enthusiasts, it is a big step up for commodity markets. Therefore, breaking the $ 12,000 barrier should trigger a massive move for Bitcoin, with the first major hurdle between $ 16,500 and $ 17,500.
This step will also get closer to 50%.
In recent months, the US dollar index has been at the center of much of the debate about Bitcoin’s movements.
It is quite clear that they are moving in opposite directions from each other, which leads to the conclusion that a weaker US dollar benefits the bitcoin price. This is also the main reason why large institutional investors are taking positions in Bitcoin, an important signal that a new cycle is approaching.
In fact, the inverse correlation is quite obvious and natural, since the global economy is built on the global reserve currency – the US dollar.
A notable example of a weak dollar was the reaction from gold after the Internet bubble in 2000.
After a market crash that year, the US dollar lost its value, which led to gold prices rising 600% in the next few years. Silver is up 1100% in this period.
As the US dollar began to show its strength, gold and silver fell sharply as expected.
As the recent weakness of the US dollar has led to a rally in commodity markets, this will also lead to the development of Bitcoin in the coming years. Bitcoin supporters often categorize this drive as “leaving the system.”
The most likely scenario is that the scope structure continues with some additional tests at lower levels.
There are several reasons for this scenario. The first was the general weakness of Ethereum in the fourth quarter, which led to the general weakness of the cryptocurrency market.
Overall, January is the perfect month for Ethereum and the markets. However, it is unlikely that there will be an outbreak in this quarter given all the uncertainty surrounding the world economy at this time.
The second argument is the conclusion that the market is still building a new cycle. During these steps, build-up bands are defined that create speed for the next impulsive move.
Bitcoin’s 4-day chart shows similarities with the start of the previous cycle in 2016. Long sideways structures gained momentum, whereupon there was a significant impulse shift to the next resistance level.
This is the most likely scenario at this point as the market is still preparing for the next big cycle. This cycle will lead the market to levels you have never seen before, but it will not happen overnight.