Bitcoin was weaker in the early New York Tuesday session as the US stock market plunged, and the US dollar index surged.
The BTC/USD exchange rate struggled to maintain a price floor at $10,000, a level it repeatedly flirted with as support and resistance throughout the European session. The pair fell below the base many times only to find a decent buying pressure reclaiming it all over again.
All that happened while the US indexes were opening lower, led by a significant slide in the technology shares. The Nasdaq Composite, which includes Microsoft, Apple, and Google’s parent Alphabet, plunged more than 3 percent right in the first few minutes of trading on Tuesday.
The index itself fell by more than 3 percent since last week, logging its worst performance since March. Meanwhile, the broader S&P 500 index dived by 2 percent at the open.
As Bitcoin erratically held $10,000, traders anticipated that it could move lower into the weekly trading session. Many pointed the next price target towards $9,600. It is the same level that coincides with a gap on the Bitcoin Futures chart on CME. That missing candle is acting as a psychological magnet, at least for now.
Again hammering support, after taking liquidity at $10,400.
Third/fourth test of this support, losing it = CME gap fill. pic.twitter.com/DrwJmMEX7L
— Crypto Michaël (@CryptoMichNL) September 8, 2020
But for now, the cryptocurrency had more reasons to stay bearish, one being a recovering US Dollar Index.
The index, which pits the dollar against a basket of foreign currencies, continued to climb upwards on Tuesday, rising 0.28 percent to 93.92, a multi-week high.
Its surge against a bearish stock market conveyed investors’ migration to cash, primarily as better-than-expected manufacturing and employment data from last week raised hopes for a sustainable US economic recovery.
The dollar also rose as US Congress delayed the second stimulus bill as Republicans and Democrats debated over the size of it. A Financial Times report even suggested that the Trump government may not even announce a great aid.
That may also have moved traders/investors away from safe-haven assets like Bitcoin for piling up cash, instead.
Bitcoin in Correlation-Conflict
The recent sell-off rounds across the US stock and Bitcoin markets put the latter in a mix. Looking ahead, traders may treat the cryptocurrency as a haven against the bearish equities.
Or, they may prefer to move their capital into cash, instead, by selling their BTC positions at a profitable level.
That partially explains why Bitcoin is not registering an explosive downside move below $10,000 yet.
Traders need further confirmation about the status of the US dollar as the greenback grapples with bearish easing policies from the US Federal Reserve and focuses on a technical correction in an overbought US stock and Bitcoin market – all at the same time.
That pretty much leaves Bitcoin in a correlation-conflict, leaving most of the regular traders to look for hints in its technicals.
And the technical indicators smell bearish, pointing BTC/USD towards a close below $10,000, with the next level of actual supports hanging near $9,800.