Will the weakness of the dollar result in the price of Bitcoin finally breaking the barrier of $ 12,000?

Historically, a weaker US dollar leads to strength in other “safe haven” assets. Analyzing the correlation, a momentum and conclusion like that can also apply to Bitcoin (BTC) and the USD.

Bitcoin has gained in 2020, while the Index of the Currency of the United States Dollar (DXY) has had a difficult year. But will this momentum continue in the coming months? Let’s take a closer look at the charts.

According Coinmarketcap, currently the market capitalization of Bitcoin is USD 210,055,274,943.

Don’t stop reading: Bitcoin Forecast: What will be the price of bitcoin in 2020 according to experts?

Bitcoin price has to hold the $ 11,000 support level to avoid a CME gap test at $ 9,600

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

Triangle broke up as most markets waited for a climax to occur, prompting a rally towards $ 11,700 and breaking out of the crucial $ 11,000 to $ 11,200 resistance zone.

However, to maintain the bullish momentum, Support has to hold at this $ 11,000-11,200 zone for a test of the $ 12,000 resistance zone to occur.

BTC/USD 1-week chart. Source: TradingView

One-week chart for the BTC / USD pair. Source: TradingView

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

This crucial barrier led to multiple tests of this area. However, a breakthrough has yet to come. But the general consensus is that the more often a level is tested, the weaker it becomes.

For example, it took almost seven years for silver to break above the $ 18 resistance.

Silver 1-week chart. Source: TradingView

One-week chart for silver. Source: TradingView

This upward break took a long time, as the price of silver was constantly rejected at the $ 18 barrier. However, the advance of the $ 18 level resulted in a big move with the continued recovery towards $ 30, a 60% increase from the breakout.

But while this isn’t much for cryptocurrency market enthusiasts, it’s a great move for the commodity markets. Thus, a breakthrough of the $ 12,000 barrier should result in a big move for Bitcoinas well as the first big hurdle is between $ 16,500 and $ 17,500.

Such a move would result in almost 50% as well.

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 recent months, the US Dollar Currency Index has been at the center of many discussions about Bitcoin price movements..

It is evident that move in the opposite way, leading to the conclusion that a weaker US dollar benefits the price of Bitcoin. This is also the main reasoning behind large institutional investors taking a position in Bitcoin, an important sign of a new cycle to come.

In fact, the inverse correlation is obvious and quite natural as the global economy is built around the world’s reserve currency, the US dollar.

DXY vs. Gold 1-week chart. Source: TradingView

One-week chart for DXY vs. Gold. Source: TradingView

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

Since the markets collapsed that year, the US dollar lost its value, resulting in a 600% rally for gold in subsequent years. Silver even rallied 1,100% in this period.

Similarly, when the US dollar began to show strength, gold and silver fell sharply, as expected.

Therefore, as the recent weakness in the US dollar resulted in a rally in commodity markets, this would also benefit any momentum in Bitcoin in the coming years.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

One-week chart for the BTC / USD pair. Source: TradingView

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

Multiple arguments can be outlined for this scenario. The first is Ethereum’s overall weakness so far in Q4, resulting in overall crypto market weakness.

In general, the month of January is a perfect month for Ethereum and the markets. However, a blowout is unlikely in this quarter of the year given all the uncertainties surrounding the world economy at this stage.

The second argument is the conclusion that the market is still building a new cycle. Along these accumulations, rclimbing bars, creating momentum for the next impact movement to occur.

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 were building up momentum, following which there was a huge stimulus move towards the next resistance level.

That is the most likely scenario right now, since the market keeps accumulating for the next big cycle. This cycle will take the market to levels never seen before, but it will not happen all at once.

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

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you must carry out your own research when making a decision.

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