Bitcoin prices wobbled between gains and losses on Wednesday as traders weighed the prospects of the second coronavirus stimulus package in the US against the vaccine approval in the UK.
The flagship cryptocurrency surged 0.5 percent to $18,876 in the early New York session. At its intraday high, it was changing hands for $19,340, a level that attracted comparatively higher selling sentiment over fears of topping out. Nevertheless, an equally strong buying pressure near the lower $18,000s kept the price from extending its bearish bias.
Vaccine vs. Stimulus
The technical conflicts between bears and bulls appeared similar to Bitcoin’s short-term fundamentals against a macroeconomic backdrop. Its price on Wednesday picked upside momentum after a bipartisan group of US senators proposed a day before a $908 billion stimulus plan.
The prospect of additional US dollar liquidity benefits Bitcoin, a cryptocurrency know for its limited supply against central banks’ infinite money-printing policies.
@RaoulGMI seems like you are right. By delaying stimulus until the problems destroy the economy, the government nearly guarantees a bigger stimulus. Kind of like driving with bald tires-once they explode it's kind of hard to regain control. dominoes. #Bitcoin
— Ruben (@Ruben22775443) December 2, 2020
For instance, the news of stimulus prompted inflation expectations for the US, as calculated by inflation-protected government securities prices, to surge to its 18-month high of 1.83 percent on Tuesday. Investors also treat Bitcoin as a hedge against inflation, a reason why the cryptocurrency has rallied fourfold against the Federal Reserve’s pro-inflation policies.
On the other hand, the UK authorized the vaccine prepared by the US drugmaker Pfizer and Germany’s BioNTech for use. That ended up taking the shine off risk-off assets like gold as investors moved into the riskier assets. It may have also limited Bitcoin’s upsides on Wednesday.
Bitcoin Technical Outlook
Technically, Bitcoin appeared to have been inching upward but inside a concerning bearish reversal channel.
Dubbed as Rising Wedge, the pattern forms when an asset fluctuates inside two rising but contracting trendlines. But it reverses direction eventually as it closes towards or hits the point where the two trendlines converge. A breakdown occurs, and the price falls by as much as the maximum height of the Wedge.
If the pattern holds well, Bitcoin could inch upward and may break above $20,000 as well. But it would eventually breakdown by as much as $3,000 should it break below the Wedge’s lower trendline.