Make or Break. Will Bitcoin Continue its Bullish Trend?
Over the past week, Bitcoin has been in a consolidation phase bouncing off from $10,000. With many bullish and bearish signals, this could be an important time to see whether Bitcoin will stay above $10,000 or go below it.
Dollar Currency Index (DXY)
Before analyzing Bitcoin's price action it is important to look at the dollar currency index due to its strong inverse correlation. Last week, I talked about how the DXY was breaking an important resistance and might launch ahead to 95. As can be seen from the chart below, this price action almost took place before reverting. The DXY is now currently testing its former resistance and it is possible that a new support is established in this area. If this were to happen and in addition to the previously mentioned bullish divergence, a case for the DXY going all the way to 95 or even 96 levels is not out of the question. If this were to happen, we could see Bitcoin plummeting sub-10K.
If we look at the BTC charts, we can see how the 20 and 50 EMAs have been strong lines of resistance. Yesterday's price action ended up being a fakeout in terms of breaking these two lines. It is important to think about the DXY as it might be the catalyst for BTC's price action at least in the short term. Since elections are coming soon, the overall economy might be preparing for the potential uncertainty of the outcome of the elections. Even though statistically, we have seen that former POTUS tend to be re-elected for a second period, there is still a chance that this year's elections prove otherwise. If Democrats win there would certainly be a short-term shift in market sentiment.
The same thesis stands with Gold as seen in the chart below. Previously, I talked about this descending triangle pattern on Gold which broke to the downside. Similar to Bitcoin, Gold seems acting after the DXY as we see a breakout to the downside and a potential retest of the previous area. The stand for Gold would be the exact opposite of that of the DXY as if it retests the new potential resistance, we could expect Gold go even lower.
In terms of general price action, it will be very interesting to see how the Dollar Currency Index acts as it has acted bullishly in previous elections. Usually, uncertainty in the markets leads to investors exiting risk-on assets and accumulating cash until there is more certainty in the markets and the boom & bust cycle begins.
More about the author:
Patrick Maldonado is a Cryptocurrency Trader & Market Analyst at Alphachain Capital.