Bitcoin (BTC) is back in familiar territory as the week kicks off after a weekend spent in its new, albeit large, trading corridor above $ 30,000.
With the U.S. President’s inauguration just days away, Cointelegraph takes a look at what else could shake BTC price action.
DXY always reverses losses
President-elect Joe Biden is inaugurated as the US dollar continues to recover.
On Monday, the US dollar currency index (DXY), which measures the USD against a basket of major trading partner currencies, hit its highest level since December 21.
The sustained uptrend at DXY tends to mean that Bitcoin growth is taking a breather. This reverse correlation creates a noticeable pattern in 2020. In this case, BTC / USD had little to lose during recent wins, the majority of which remained despite tremendous volatility.
DXY was also unfazed by Biden’s decision to spend an additional $ 1.9 trillion on debt-financed coronavirus support, which Gemini Exchange co-founder Tyler Winklevoss dubbed “another multi-trillion dollar advertisement for Bitcoin” last week has been.
As Cointelegraph reported, however, analysts continue to advocate that the dollar’s weakness should persist over the long term. Even traditional market players continued to watch the magnitude of the surge in USD supply, which shocked many to view Bitcoin as an alternative store of value.
“A foreign exchange market is no different from another market,” William Dinning, chief investment officer of UK fund manager Waverton Asset Management, told the Wall Street Journal over the weekend.
“When a lot of potatoes are available, it gets cheaper. When a lot of dollars are available it gets weak. “
However, new Treasury Secretary Janet Biden has stated that the US will not purposely aim to maintain a weak dollar in favor of trade advantages.
1-day candlestick chart of the United States dollar currency index. Source: TradingView
Stocks need a break, says analyst
In the markets, stocks showed indecision earlier in the week after calming down on Biden’s announcement.
Asia had mixed performance and with Wall Street not yet open at press time, US futures were just a tad higher as of Friday.
The weak earnings were strange to some, even though China had released fourth-quarter economic growth statistics that eclipsed all expectations. As Bloomberg reported, the world’s second largest economy grew 6.5% in the quarter. This made it the only major economy that avoided a contraction of the coronavirus in the past year.
“Markets needed a breather or even a retreat to justify reflationary expectations,” Ben Emons, chief executive of global macro strategy at Medley Global Advisors, told the release.
As Cointelegraph reported, Bitcoin continues to outperform all traditional assets in terms of earnings in 2021, with the correlation steadily tipping towards zero for both stocks and safe havens like precious metals.
Bitcoin rolls 90-day return correlation. Source: Digital Assets Data
Spotlight on “Altseason”
Bitcoin itself has also taken a breather in the past few days. After weeks of very volatile trading conditions, investors were offered a quiet weekend, which was also a welcome surprise for the stock exchanges.
Previously, the US platforms Coinbase and Kraken had suffered outages at critical prices, and the other trading platform eToro warned last week that it may have to limit Bitcoin buy orders if the weekend leads to new volatility.
In this case, things were much calmer than expected as BTC / USD had stayed up or down with no real changes.
As Michaël van de Poppe, an analyst at Cointelegraph Markets, noted, attention began to shift away from Bitcoin to altcoins.
In a tweet on Monday, he reiterated the narrative that other cryptocurrencies would move into the spotlight in the short and medium term. He summarized:
“At this point, the following is most likely to happen. Aid campaigns are gathering all over the #altcoin markets. FOMO on altcoins. #Bitcoin corrects again -> Altcoins do HL and test again.
A look at the ranking confirmed the beginning of the so-called “old season”, in which five of the 100 best cryptocurrencies in terms of market capitalization recorded daily growth of more than 20%. In terms of weekly performance, seven tokens rose more than 100%.
Ether (ETH), the largest altcoin, was on its way to all-time highs itself, rising again above $ 1,200 after a dip where it lost $ 1,000 in support at one point.
With that, Bitcoin’s market capitalization dominance continued to decline on Monday, reaching 66.3% from 69.5% at the start of the year.
Bitcoin market cap dominance percentage. Source: trade view
Price movements leave all-time highs unaffected
For the spot market, Bitcoin’s volatility decreased steadily at the beginning of the week. For the past three days, the trading range has narrowed within the $ 30,000 to $ 40,000 corridor, adopting a pattern of lower highs and higher lows known as compression.
As Van de Poppe noted last week, this is a welcome sign that gives the market time to regain the strength required for a final breakout of the compression structure. In the case of Bitcoin, this should lead to pressure on or even through current all-time highs of $ 42,000.
BTC / USD 1 hour candle chart (Bitstamp). Source: TradingView
In the long term, he predicted that Bitcoin would be between $ 275,000 and $ 350,000 during this bull cycle. For Ether, the peak was between $ 7,500 and $ 12,500, he told Twitter followers on Friday.
For fellow analyst filbfilb, it was still a long way to go before some form of significant upward volatility returned to Bitcoin.
“An interesting fractal is going on here. Take a break of 40 km and transform yourself into support and it’s a full moon mission, ”he summed up the subscribers of his special Telegram channel, highlighting a chart structure that could enable a trip to the top of the trade corridor.
“If the fractal fails, we can pump it up to 25 miles and then trace it back. Break the diag and turn it into resistance and maybe we need to play more in this area. “
The fundamentals reached new record highs
Finally, a familiar bull signal returned to investor radar in the past few days. Bitcoin’s network fundamentals are a classic sign that the price is still on the uptrend. They reached new highs.
Bitcoin hash rate and difficulty level. Source: Digital Assets Data
For the hash rate, which provides an estimate of the computing power for the Bitcoin blockchain, 155 exahashes per second (EH / s) were calculated on Sunday.
The metric has been increasing almost consistently since late December, adding 25 EH / s in just two weeks.
Equally bullish was Difficulty, arguably the most important fundamental metric for Bitcoin as it provides insight into the health and competitiveness of miners.
After a 10.8% increase in the last automated adjustment on January 9, the difficulty level hit a new record high of 20,607,418,304,385. The next adjustment, due in four days, will add another 6% based on current estimates.
A sustained upward trend in both indicators has traditionally been associated with price gains that could occur after a grace period of several months.