Bitcoin has shown substantial stability in the last few days as legacy markets continued to crash, per Bloomberg, March 21, 2020. After the correlation between Bitcoin and the S&P 500 hit an all-time high over the last week, can Bitcoin make a move and set the tone for the revival of its safe-haven narrative?
Stability in Bitcoin Improves Sentiment
The strength seen in the Bitcoin market is encouraging for anyone in the space, or any trader actively monitoring charts. Since hitting a bottom of $3,850 on this move, Bitcoin rebounded and is trading above $6,500 at the time of writing.
Price action shows considerable strength, and many believe Bitcoin is primed for take-off as the global markets continue to deteriorate. Bitcoin, with the help of its loyal bulls, is trying to make a break for the exit in this systemic correction. After a long correction in 2018, while stocks were doing well, Bitcoin bottomed and hit an accumulation range.
The latest correction was simply an exaggerated reaction thanks to leveraged speculators exiting the market en masse. If cycles are to be believed, this was an anomaly for Bitcoin, and a rebound is certainly on the card for the $100+ billion cryptocurrency.
However, Bitcoin’s decoupling is not yet guaranteed, and market participants should refrain from getting too optimistic until there are clear signs of it on higher timeframes.
Dollar Dominance Threatens Bitcoin Performance
The DXY is an index that measures the value of the U.S. dollar relative to other major currencies. When investors sell stock and head for cash, demand for dollars pushes DXY up. Since the dollar is the global reserve, many investors in Europe and Asia are holding dollars too.
In the last week, the DXY index has gone berserk, and this usually spells trouble for Bitcoin. Since Bitcoin is priced against the dollar, a stronger dollar is inherently bearish for Bitcoin. With the Federal Reserve cutting interest rates to 0 and foreign investors looking to hold their money in dollars, the outlook for USD is positive, and an increase in USD’s value relative to other currencies is certain.
Bitcoin can still have positive performance when the dollar is booming, but it will nonetheless dwarf the gains seen in Bitcoin.
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