All eyes on the US Dollar as Bitcoin attempts to recover
The cryptocurrency’s drop came as the U.S. dollar index bounced around 0.7%.
The recovery taking place now also coincided with a drop in the U.S. dollar index.
Analysts say that it’s important to keep an eye on this market moving forward.
BITCOIN COULD LOSE EVEN MORE AS U.S. DOLLAR HITS KEY LEVEL
Bitcoin fell extremely hard over the weekend and into Monday after reaching $42,000 last week. The cryptocurrency fell from those aforementioned highs to $30,000 in a massive flush lower on Monday, liquidating billions worth of positions.
The drop in the market was based on macro trends, some have indicated.
Bitcoin’s drop on Monday coincided with weakness in the strength of foreign currencies, which had trended higher against the U.S. dollar over the past few months. The U.S. dollar index bounced around 0.7%, which is a large move for a market worth trillions.
BTC’s recovery over the past few hours has also coincided with a drop in the U.S. dollar index.
Many analysts say it is now important to watch where this index goes next to determine the overall direction of the crypto market.
One analyst shared the charts below just recently, noting that Bitcoin’s next move is likely to be determined by the U.S. dollar.
The U.S. dollar rally comes in spite of Joe Biden, the incoming President, calling for additional stimulus for the American people. He said that he wants trillions worth of stimulus for the economy, along with $2,000 stimulus cheques for the people.
The rally in the U.S. dollar may come as a result of Biden’s election win being confirmed by Congress, which may have dissuaded fears of further conflict in the Capitol.
ONE HEADWIND IS GONE
It’s worth noting that one key headwind is gone for Bitcoin, which could fuel a further rally higher.
Willy Woo, an on-chain analyst, said after the correction that the drop was seemingly a byproduct of Coinbase going down. He explained on the matter:
“Spot market sell off started around $38k, then Coinbase partially failed, not registering buys, causing its price to go $350 lower than others, this pulled down the index price that futures exchanges use to calculate leverage funding, wrecking bearish havoc on speculative markets.”
Coinbase is now back up and the funding rate/futures market has restored to some sense of normality.
Bitcoin could resume its ascent higher as this bearish factor is gone.
Other trends that could boost the cryptocurrency include latent institutional buying demand. Analysts commented online that there was a vast amount of accumulation by larger players during today’s drop, as evidenced by order book trends and on-chain data.
