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Will the weakness of the dollar cause the price of Bitcoin to finally break the $ 12,000 barrier?

October 17, 2020

Historically, a weaker US dollar adds strength to other “safe havens”. When analyzing the correlation, such a push and such a conclusion can also apply to Bitcoin (BTC) and the USD.

Bitcoin rose in 2020 while the US dollar currency index (DXY) had a difficult year. But will this dynamic continue in the coming months? Let’s take a closer look at the diagrams.

According to Coinmarketcap, Bitcoin’s market cap is currently $ 210,055,274,943.

Will the weakness of the dollar cause the price of Bitcoin to finally break the $ 12,000 barrier?
Will the weakness of the dollar cause the price of Bitcoin to finally break the $ 12,000 barrier?

Don’t stop reading: Bitcoin forecast: what experts say will the price of Bitcoin be in 2020?

Bitcoin price needs to maintain the support level of $ 11,000 to avoid a CME gap test at $ 9,600

BTC / USD 1-day chart. Source: TradingView

1-day chart for the BTC / USD pair. Source: TradingView

The triangle dissolved as most markets waited for a climaxThis caused a rally towards $ 11,700 and broke out of the crucial resistance zone of $ 11,000 to $ 11,200.

However, in order to maintain bullish momentum, Support must be held in this $ 11,000-11,200 zone for a test of the $ 12,000 resistance zone to be conducted.

BTC / USD 1 week chart. Source: TradingView

Weekly chart for the BTC / USD pair. Source: TradingView

Bitcoin’s weekly chart shows the importance of the USD 12,000 resistance level. Since the bear market began, the $ 12,000 area has been a major hurdle.

This crucial barrier led to several tests in this area. A breakthrough is still pending. However, the general consensus is that the more often a level is tested, the weaker it becomes.

For example, it took silver almost seven years to cross the $ 18 resistance.

Silver 1 week chart. Source: TradingView

Weekly chart for silver. Source: TradingView

This uptrend went on for a long time as the price of silver was constantly declining at the $ 18 mark. However, The rise in the $ 18 level resulted in a big move with the ongoing rebound towards $ 30, a 60% increase from the breakout.

While this is not much for cryptocurrency market enthusiasts, it is a big step for commodity markets. So, Breaking the $ 12,000 barrier should be a big step for BitcoinThe first major hurdle is between $ 16,500 and $ 17,500.

Such a step would also lead to almost 50%.

A weaker dollar would be good for Bitcoin

DXY vs. BTC / USD 1-day charts. Source: TradingView

1-day chart for DXY vs. Gold. Source: TradingView

In the past few months, the US dollar currency index has been the focus of much discussion about Bitcoin price movements..

It has been proved that Go in the opposite direction, which leads to the conclusion that a weaker US dollar will benefit the price of Bitcoin. This is also the main reason large institutional investors are taking a position in Bitcoin, a major sign of a new cycle.

Actually, The reverse correlation is obvious and natural, as the world economy is built on the world’s reserve currency, the US dollar..

DXY vs. Gold 1 week chart. Source: TradingView

Weekly chart for DXY vs. Gold. Source: TradingView

The main example of the US dollar’s weakness is the reaction of gold since the “dot-com” bubble of 2000.

The US dollar has lost its value since the markets collapsed that year, causing gold to rally 600% in subsequent years. Silver even rose by 1,100% during this period.

Similar, As the US dollar started showing strength, gold and silver fell sharply, as expected.

Since the recent weakness of the US dollar caused commodity markets to rebound, it would also benefit Bitcoin’s momentum in the years to come.s. Bitcoin believers often classify this push as an “option to exit the system”.

Most likely scenario for the price of Bitcoin

BTC / USD 1 week chart. Source: TradingView

Weekly chart for the BTC / USD pair. Source: TradingView

The most likely hypothesis would be a continuous scope structure with some additional tests at lower levels..

Multiple arguments can be given for this scenario. The first is Ethereum’s general weakness so far in the fourth quarter leading to general weakness in the crypto market.

In general, January is a perfect month for Ethereum and the markets. However, given the uncertainties surrounding the global economy at this stage, an outbreak is unlikely this quarter of the year.

The second argument is that The market is still building a new cycle. Along these accumulations, rClimbing poles that give impulses for the next impact movement.

BTC / USD 4-day chart. Source: TradingView

4-day chart for the BTC / USD pair. Source: TradingView

The 4-day chart for Bitcoin price shows similarities to the start of the previous cycle in 2016. The long and side builds built momentum, which then gave a big incentive for the next level of resistance.

That is the most likely scenario right now The market continues to accumulate for the next big cycle. This cycle will take the market to unprecedented levels, but not all at once.

Hence, accumulation is a critical part of escalation in such a market, and that is exactly what seems to be happening today.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You must do your own research when making a decision.

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