Bitcoin has rallied back above $51,000 as the dollar stagnates, showing some signs of a short-term top. The U.S. dollar index (DXY) now shows some signs of a short-term top as the bitcoin price now demonstrates some signals of a near-term rally.
There is a growing narrative that the bitcoin price normally coincides with a drop in the value of the US dollar. Since the stores of value like bitcoin and gold are priced against the dollar, any downtrend in the DXY may likely have a positive impact on the price of bitcoin.
As the dollar started to consolidate, BTC broke above $50,000 on March 3, putting it back on track to retest the $51,600 resistance level once more.
Above $51,600, there is minimal resistance until $56,000. Thus, breaking past that level is crucial to secure some upside momentum in the near term. One semi-pseudonymous trader, Bitcoin Jack, who also projected that the $3,600 bottom in March 2021, stated:
“Considering it’s very likely to see a $1.9T stimulus package approved within the next 2 weeks, my best guess is the dollar is topping out here. Could be wrong, but the structure looks very similar to the previous consolidation as well.”
If the flagship crypto continues to rally as the dollar stagnates, it may enable bitcoin to concurrently benefit from two macro factors. The dollar’s decline naturally benefits bitcoin. Also, the impending 1.9 trillion dollar US stimulus may catalyze a wider bitcoin rally while diluting the value of the USD.
Bitcoin plunged in the last week as a result of the shaky macroclimate, as the dollar started to climb and the bond yields soared to a yearly high. If the macroeconomic conditions were the primary catalyst for BTC’s downturn, now that bond yields are easing, it may underpin Bitcoin’s momentum in the coming weeks.
Was $42,900 The Local Bottom?
According to the director of global expansion at Ground X, John Cho, $42,900 was most likely the local bottom for BTC in the near and mid-term.
Cho previously projected a short-term Bitcoin downturn, anticipating a drop to almost $40,000 to $41,000. Bitcoin did not plunge that low, but it bottomed in the sub-$43,000 region, almost completing a 30% drop from its local high. Cho stated:
“As of the now, 42.9k seems to have been the (local) bottom. Either way, glad the bulls are back in control.”
$44,000 was a major support level, and BTC’s rapid recovery towards $51,000 indicates that the drop itself was a deviation. In technical analysis, deviation refers to when an asset shortly drops or rises above a critical level, and then reverts to the mean.
After the latest bitcoin recovery to reach above $50,000, the dominant crypto must retest the $56,000 resistance area. Above that, the path toward a new all-time high is open, making $60,000 the next possible target.