Bitcoin was under pressure during the early New York trading session as a resurgence in the US dollar drove the price of other safe-haven assets lower.
The greenback was up 0.43 percent on Friday, prompted by comments from the Federal Reserve that showed that it is not planning to apply unconventional strategies to maintain interest rates lower for too long amid the coronavirus pandemic.
That created a short-term demand for the US dollar, which had earlier fallen to its 27-month low. On the other hand, Bitcoin slipped lower from its year-to-date high near $12,500 on rising profit-taking sentiment.
Both dollar and Bitcoin have shown an inverse correlation with each other since March 2020.
Bullish Bias Intact
Regardless of recent losses, the fundamentals remained in favor of Bitcoin, with the potential of another upside rally in the cards.
Observers lined up a string of macro catalysts behind the next crypto bull run. They included poor US bond yields, concerns about the upcoming US presidential election, and fears of higher inflation as the Fed continues its open-ended stimulus program to aid the US economy through the coronavirus pandemic.
Grayscale Research, a New York-based investment firm, wrote in a research note that it sees the US central bank’s relentless money printing as one of the primary reasons why Bitcoin will rise. It stated:
“Amidst unprecedented monetary and fiscal stimulus, investors are searching for ways to protect against an ever-expanding financial supply. Because of Bitcoin’s unique qualities – such as its verifiable scarcity and supply that can’t be controlled by a central authority – we believe it can be leveraged as a store of value and as a way to escape this great monetary inflation.”
Bitcoin rose by more than 200 percent after the Fed announced its infinite quantitative easing program. The cryptocurrency primarily benefited from a falling US dollar. The same factor also played a significant role in sending equities, gold, government bonds, silver, and other markets higher.
To some analysts, investors had no alternatives amid a coronavirus-struck economic meltdown.
Beware of Bitcoin Dips
As Bitcoin correction continued, some observers also noted the cryptocurrency’s likelihood of extending its downtrend based on technical setups.
Amsterdam-based trader Michaël van de Poppe said Bitcoin needs to hold above $11,400-11,600 area to sustain its short-term bullish bias – or risks falling further lower.
“If we hold [the area], we can consolidate for a bit and have some decent bounces,” he said. “Losing the zone and I think the CME gap at $9,700 area is a serious scenario.”
Bitcoin was trading at $11,666 at the time of the publication. On a weekly basis, the coin was down 2.13 percent.