Positive reactions to $1.9 trillion stimulus package stifle bullish Bitcoin sentiment
On 15 January, Bitcoin (BTC) fell below $35,000 as renewed US dollar strength puts pressure on the leading cryptocurrency. BTC got a bounce at support at $34,300 and is hovering around $36,000 at the time of writing.
Four-hour chart of BTC/USD (Bitstamp)
Bitcoin back towards $30,000
On Friday, data from Cointelegraph Markets and TradingView show BTC/USD at its lowest level in over 24 hours, with valid support at $34,000.
The previous trading day saw the pair regain $40,000 for a moment before retreating into a range formed earlier in the week. The recent drop reinforced the hypothesis that Bitcoin could remain in this range, with support at $30,000 and $40,000 as strong resistance.
„Consolidation of #Bitcoin is very healthy for the market after the huge momentum move ended at $41,500,“ explained Cointelegraph Markets analyst Michaël van de Poppe in a series of tweets:
„#Bitcoin is approaching a bounce zone after rejection from decisive resistance around $40,000. Benefits from further consolidation before continued bullish momentum. Completely healthy.“
Halving cycle analysis suggests „upside potential of 7X“
Bitcoin’s new contraction coincides with a spike in the US Dollar Index (DXY) caused by the announcement of the $1.9 trillion stimulus plan unveiled by incoming President Joe Biden to combat the coronavirus pandemic. Despite the severity of this USD supply expansion, it seems that markets have reacted positively to the plans, pushing DXY up at the expense of Bitcoin, due to the known inverse correlation between the two assets.
„Context: the dollar is recovering over several ranges. Quite a strong recovery from a valid support zone for months. Some argue it’s a negative factor for Bitcoin, gold and risk assets, explaining the narrative,“ summed up Cointelegraph analyst Joseph Young.
BTC/USD (Bitstamp) vs. DXY (orange)
BTC/USD (Bitstamp) vs. DXY (orange). Source: TradingView
Young pointed out that, in the derivatives markets, investors engaged in „buying the correction“ were causing another problem, potentially dampening the prospects of a relief rally.
Widening the view, however, Bitcoin is performing worse than previous bullish cycles. According to on-chain analytics resource Ecoinometrics, this paves the way for further substantial gains.
Bitcoin price comparison post-halving as of 15 January 2021
Comparison of Bitcoin prices post-halving as of 15 January 2021. Source: Ecoinometrics/ Twitter
„This bull market will not stop at $40,000,“ said a tweet with a comparative chart.
„From the growth of previous cycles we still have 7x upside potential.“