The U.S. dollar experienced a surge last week against a basket of fiat currencies, leading to increased pressure on risk assets such as Bitcoin (BTC). Despite this pressure, Bitcoin managed to hold on to its key support, indicating a positive sign for the market. As the dollar index rose by over 1.3%, Bitcoin experienced a 5.8% drop. However, it’s worth noting that sellers were unable to establish a foothold under the 200-week simple moving average, a widely-tracked technical line.
By defending this key average, the long-term bullish trend has been sustained, according to Alex Kuptsikevich, a senior market analyst at FX Pro. For cautious buyers waiting for stronger evidence of an end to the price pullback, he suggests that the cryptocurrency must top $28,500. Bitcoin currently trades around $27,400, marking a 1.4% increase on the day.
Some believe that the dollar may continue to rise, potentially keeping cryptocurrency gains in check. Ilan Solot, co-head of digital assets at Marex, believes that the dollar is due for a bounce as markets reevaluate the FED’s future policies on interest rates. Depending on the intensity of the dollar upswing, it could cause short-term damage to assets like commodities and cryptocurrencies.
Analysts at Swissblock Insights hold a similar view, noting that if the dollar index reaches 104 to 107, it could continue to pressure Bitcoin as its ties to traditional finance (TradFi) strengthen. On the other hand, Swissblock Technologies predicts that the imminent dollar bounce will lead to a deeper decline, which would benefit cryptocurrencies in the long run.
Both Bitcoin and the dollar index are expected to experience price discovery – Bitcoin to the upside and the dollar index to the downside, according to Swissblock Insights. Solot also anticipates that any pullback in Bitcoin would be short-lived, providing a prime entry point for investors looking to position themselves in the market.
During the recent bout of weakness, wallets known to hold coins for at least six months accumulated more coins, signaling confidence in the long-term prospects of the cryptocurrency. It remains to be seen whether Bitcoin’s resilience amidst dollar surges will continue attracting new investors and ultimately drive the cryptocurrency’s value upward in the future.
Source: Coindesk
