Bitcoin fell sharply as the US dollar surged to its highest level in the last seven weeks.
Traders went into a defensive mode amid concerns over a resurgence in the coronavirus infections and a delay in the second fiscal stimulus package from the US Congress. That resulted in a new round of profit-taking activities across the cryptocurrency and commodity markets.
From a long-term perspective, Bitcoin entered a consolidation phase–a bearish correction that succeeded a 200-percent bull run. As of Wednesday, BTC/USD was trading 16.87 percent lower from its year-to-date high near $12,500. The macro-setup, led by ultralow interest rates, quantitative easing, and the prospects of higher inflation, remained biased towards bulls.
“Stop trading,” proclaimed Ronnie Moas, the founder of Standpoint Research, stating that the US dollar would eventually lose half of its value during the next 20 years.
“Bitcoin will probably jump by at least 1,000% during that time,” the analyst ADDED. “[So] take some of your US dollars and buy some BTC. It is not that complicated to figure this out.“
But the technical outlook hinted at worsening in the coming daily sessions ahead. Bitcoin plunged below its two critical support waves recently: the 20-day moving average and the 50-day moving average, as shown in the chart below.
Meanwhile, it also hinted to break below a Symmetrical Triangle range, signaling an extended downside move towards $7,800. That is because of the technical description of the continuation indicator; it says the price could ideally fall by as much as the maximum height of the Triangle. That is around $2,500.
Bitcoin Bullish Rebound
The turbulent period for Bitcoin, as well as every asset that has suffered from a strong dollar, might end, according to a gold analysis released by Citigroup, Inc.
The banking giant expects the precious metal to hit a record level on US elections risks. It stated that the presidential race could be “an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after U.S. elections.”
Bitcoin and Gold have traded in sync since March 2020, with the former tailing the latter’s chart trends by a minor delay.
Others expect the uncertain US presidential elections to leave a sour taste in the mouth of safe-haven investors.
“A very tight election and [the] contested result will probably be the spark to get people nervous,’ SAID Amo Sahota, executive director at San Francisco-based currency advisory firm Klarity FX. “That’s positive for the dollar.”
So it appears, Bitcoin and gold both would trade in an unchartered territory until the election concludes.