After the bulk of the trading took place last week, BTC/USD is now up 15% from seven days ago – where do we go from here?
Cointelegraph takes a look at five factors that could affect bitcoin’s position in the coming days.
Stocks break records, but the dollar falls
Bitcoin’s pre-weekend rise was accompanied by a familiar macro market scenario.
As the coronavirus and its effects continue to wreak havoc across much of the world, equity markets reached new record highs, with the S&P 500 posting its biggest weekly gain since November last year. Oil prices rose above $60 a barrel on Monday for the first time in more than a year.
Sentiment was boosted by the prospect of new spending in the US as lawmakers sought the final details of President Joe Biden’s $1.9 trillion stimulus package.
As bitcoin advocates have consistently noted since the beginning of the pandemic and before, the increase in spending means that more money is concentrated closer to the government and central bank – a phenomenon known as the Canillon effect – paving the way for continued intervention in the stock market, among other things.
At the same time, the U.S. dollar has suffered in recent days from continued talk that the global reserve currency will continue to depreciate.
The U.S. Dollar Index (DXY) fell well below 91 on Monday, reversing a recent uptrend that began in mid-January.
Daily candlestick chart of the US Dollar Index (DXY). Source: TradingView
Although opinions on stimulus measures vary, policymakers seem to agree that inflating the money supply is the only option.
I remain concerned about secular stagnation, I think fiscal policy needs to be much more proactive in the coming years, and I certainly share the administration’s view that expansionary policies at a time like this must be very wrong, Lawrence Summers, Obama’s top economic adviser, wrote Sunday in the Washington Post.
But based on qualitative considerations such as these, it is not possible to judge whether $1 trillion, $1.9 trillion, or $5 trillion should immediately follow short-term stimulus measures before the final billion-dollar public investment measures.
As often reported by Cointelegraph, the weakness of the DXY has tended to boost the performance of BTC/USD, although the negative correlation has decreased significantly since September 2020.
Correlation ofBTC 90 day return with USD, VIX, Gold, S&P500. Source: Digital asset data
BTC price shows best weekly slot
So, following the trade announcement, it seems that bitcoin could soon break out of its short-term trading range between $30,000 and $40,000.
The signs were already there – fundamentals were at all-time highs and several indicators pointed to early 2021 being the first rather than the last leg of a bull-run.
The trend continues this week: The hash rate of the network is at record levels, and with the next update in ten days, the complexity will increase by almost 5%.
Sunday’s weekly close is officially bitcoin’s highest point.
1 week candlestick chart BTC/USD (Bitstamp). Source: TradingView
There will be pullbacks, perhaps even to the point of retesting the top of the flag as support, trader Scott Melker said in a summary of the market in a new chart forecast Saturday.
But technically, this is a confirmed breakout that should eventually take $BTC to $63K. Disclaimer – Models rarely hit the mark, but the rules are the rules.
Over the weekend, bitcoin crossed the $40,000 mark for the first time in nearly a month, fueling expectations that a restructuring of the share price could follow.
Ether Futures Marking
But as strong as Bitcoin is, Monday was all about altcoins and Ether (ETH) in particular.
After breaking its own records last week, the largest altcoin got its own ether futures contracts from CME Group.
With a wave of professional traders now preparing to jump in, the excitement in the market was already evident last week when Grayscale added to the buying frenzy that took ETH/USD above $1,750.
But the question now is whether this performance can continue, or whether the futures series is an anti-climax that leads to corrective behavior.
Personally, I’m not getting into the markets at all here, Cointelegraph market analyst Michel van de Poppe told readers on Twitter on Sunday.
Progressive profit taking has been my game on swing trades lately, which will give me flexibility in the coming weeks. I don’t know how the markets will react to the CME futures starting tomorrow.
Van de Poppe added that in the event of a reversal, the likely support levels are well below the spot price, at $1,100-$1,175 and $875-$950.
In 2017, the launch of the first bitcoin futures contracts coincided with a price spike, followed by a downturn that ushered in a year-long bear market. At the same time, the absorption of futures is much slower than expected, not until 2019.
ETH/USD 1 day candlestick chart (Bitstamp). Source: TradingView
Bitcoin dominance down
However, futures are not the only driver of Ether, and continued investment in DeFi and other major altcoins could continue to give Bitcoin headaches.
DeFi tokens are on the rise this year, with five altcoins rising more than 115% in the past week.
Thus, bitcoin’s share of the total marginal rate of the crypto-currency market is shrinking. The current 61% is back to last October’s level, just 5% below the year’s low.
Graph of market dominance by cryptocurrencies. Source: CoinMarketCap
In January 2017, after the second half of the year, we were only a few weeks into the HUGE altcoin season, noted popular Twitter commentator The Moon, adding a chart comparing bitcoin’s dominance now and three years ago.
Bitcoin’s dominance has fallen by 60% and altcoins have become 20, 50 or 100 times stronger. Do you think something like that could happen again?
The world’s richest man, Elon Musk, returned Monday with a new ad for the altcoin Dogecoin (DOGE).
Doge seems inflationary but insignificant (a fixed number of coins per unit time), while BTC is likely deflationary, he said on Twitter.
Ideally, the operating speed of the dojas should be several orders of magnitude higher.
As Cointelegraph reports, the success of Ether and DeFi is not without its problems. Transaction costs in the form of gas have exploded as prices have risen, causing problems for both users and exchanges.
$90,000 by April?
That’s right, that’s the conclusion of quantitative analyst PlanB on bitcoin’s performance since the last event in May last year, when the coin was halved.
In an update on Twitter, the creator of a family of stock price forecasting models revealed that bitcoin was in the middle when compared to the post-Holving periods of 2013 and 2017.
So depending on whether the next bitcoin move looks more like the former or the latter, price targets range from $100,000 to $288,000 on average.
BTC/USD comparison after the match. Source: PlanB/Twitter
Meanwhile, following the current predictions based on a half cut, a popular commentator on Bitcoin Archive mentioned a goal of $90,000 back in April this year.
The reason, it is said, is that BItcoin is actually following the behavior after a decline in 2017, but much higher.
If we continue on this path, 90k in April/May is the goal, he summarized using data from Ecoinometrics.
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