Bitcoin melts as the strong dollar weighs on
A large drop in the prices of cryptocurrencies, including Bitcoin, was seen on Saturday as selling pressure began to gain traction.
At the time of writing this report, Bitcoin had broken below $42.5K.
Bitcoin, which has exhibited an inverse correlation with the dollar since January 2022, is relatively suffering pullbacks as the dollar continues to rally in Q2.
On April 7, the U.S. dollar index, which measures the strength of the greenback against a basket of foreign currencies, touched its highest level since May 2020, reaching 99.82.
Outlook
- Now that the index has broken out of a bullish continuation pattern known as a “bull flag,” it appears to continue its uptrend.
- Accordingly, Bitcoin has formed the opposite setup to the dollar, a bear flag, indicating more pain for the flagship cryptocurrency.
- The price would fall to the previous downtrend height in a “perfect” scenario of a bear flag breakout.
- Though it’s critical to understand that the 200-day moving average has relatively provided reliable support during bull markets as well as significant resistance during bear markets.
- Recall that price actions show Bitcoin has reacted to the upper trendline of the bearish flag pattern, and after stabilizing above the broken $46K price level for a few days, it has finally been rejected and has fallen to lower levels
- Following a 8% dip in Bitcoin over the past week, the dispersion in crypto returns suggests traders are uncertain.
- Further, alternative cryptos (altcoins) have fallen in and out of favour as investor sentiment shifts between bullish and bearish.
Consequently, rising U.S. interest rates affect the Crypto market like a big hammer. It becomes less attractive to invest in crypto if investors can find yield in lower-risk corners of the market.
Nevertheless, some recent crypto developments may help reduce the risks associated with it. There is a growing sense of regulatory clarity, particularly after President Biden signed an executive order earlier this month that industry participants deemed “beneficial.”
