Bitcoin price analysis continues to show weakness over the last 24 hours, as BTC has continued an on-going downtrend. Visionary Financial has covered the US Dollar for the last few weeks, as it continues to negatively affect Bitcoins momentum. Why could the status of the US Dollar cause issues for Bitcoins price in the near term?
Bitcoin Price Analysis
Earlier this week, Bitcoins price fell ~ 6%, as the digital asset failed to penetrate $11,000 resistance levels. At the time of this reporting, BTC is currently trading at $10,213. In terms of performance metrics, Bitcoin has fallen -7% over the last week, and -2.44% the last 24 hours. As many would expect, this has also caused panic selling in most altcoins. If we take a look at CoinMarketCap, we can see that the top 18 cryptocurrencies by market capitalization are all in the red the last 24 hours.
What is fueling the negative sentiment behind Bitcoin?
US Dollar Momentum
For the last 3-4 weeks, Visionary Financial has been covering the US Dollar and its importance to Bitcoins momentum. In last week’s market recap, it was stressed that traders and investors would be watching the Dollar momentum this week, and that it could continue to impose issues for Bitcoin. The chart below displays jaw dropping metrics pertaining to Bitcoin vs the Dollar index. BTC has a high inverse relationship to the Dollar, meaning it tends to do well when the Dollar is struggling. This is typical of any store of value asset, but impressive given the criticism around Bitcoins infrastructure.
By assessing price action on the one year chart, there have already been 5 scenarios in which drastic moves in the dollar index have pushed Bitcoins price to the opposite direction. If you were to apply Bitcoin price analysis on a longer time frame, you would see the same trends occurring. Ever since the Dollar index bounced off yearly lows in late August, it has created a bearish environment for BTC/USD. Based on historical price action, BTC could experience even more carnage if the Dollar continues this trend.
Why Is The Dollar Rallying?
During the earlier stages of Coronavirus, the Dollar Index rallied to 103 when lockdowns were going in full force, and investors were taking a risk-off approach. If we then fast forward to late August, the Dollar Index had tumbled nearly -11% due to unprecedented amounts of financial stimulus being injected into the market. Even though many investors in the crypto space are used to this type of volatility, its a terrible sign when its occurring with the world’s reserve currency. This uncertainty in traditional markets ultimately fueled Bitcoins momentum ( see the chart above ).
The Dollar Index finally found its bottom in late August, and the on-going rally is applying pressure to Bitcoin. In an environment where COVID-19 conditions are arguably getting worse, plus additional uncertainties around the upcoming election, the Dollar Index is in a prime position to continue its uptrend. Based on historical price action, this could be worrisome for Bitcoins price in the near term.