Inventory increase, greenback eclipse: 5 issues to see in Bitcoin this week
Bitcoin (BTC) starts a new week of stocks rising and the US dollar falling – all while trading above $ 16,000 again. What's next for price promotions?
Cointelegraph takes a look at the factors that could affect Bitcoin's development in the coming days.
Stocks near all-time highs while USD falls
This week's macro environment feels a little different than last – stocks gaining fueled by a major Asian trade deal as the US dollar loses ground.
According to the latest November 16 data, the US dollar currency index (DXY) fell to 93.58 from 92.28 post-election last week. Traditionally, Bitcoin moves the opposite of DXY, and although this relationship has been less pronounced lately, strong moves in either direction can still have an impact on BTC / USD.
10-day chart of the US dollar currency index. Source: TradingView
Asian stocks led the way on Monday. 15 nations signed the long-awaited Regional Comprehensive Economic Partnership (RCEP), which aims to lower trade tariffs between them by up to 92%.
Sentiment spread to European and US futures and markets were now on track to hit record highs across the board. The situation is strangely familiar – after the crash and subsequent recovery earlier this year, markets are brisk again, despite tightened coronavirus restrictions around the world.
As Cointelegraph previously reported, the artificial interference of central banks remains a major cause of concern about the real health of stocks.
Macro investor Dan Tapiero analyzed the status quo, arguing that ongoing economic policies would nonetheless contribute to safe havens like Bitcoin.
“Expect more liquidity injections from the central banks. Short-term economic activity will slow down again when caution returns, ”he tweeted.
“No view of Covid, just people's reaction to it. Mkts is well supported as #GOLD and #Bitcoin continue to benefit. "
Bitcoin in the third highest weekly closing
Bitcoin's weekend price action allowed it to start its third best week in history after closing a weekly closing price above the landmark area of $ 15,890.
For the weekly chart, this means that Bitcoin surpassed its performance from the previous week to achieve the third-highest weekly close on record Sunday.
Only two more weekly closes were higher, but analysts continue to debate whether the market will try to revisit them.
Bitcoin has closed weekly since its all-time high. Source: TradingView
"The market is generally at a crossroads," Cointelegraph Markets analyst Michaël van de Poppe summed up late Sunday when BTC / USD was around $ 15,850.
"If we get below $ 15,500, I expect we'll see a correction across markets with BTC of possibly $ 13,000 or less."
Previously, trader Tone Vays said he would be targeting a top around $ 17,000 or $ 18,000.
"I do not think that this current boost will lead us to new highs," he predicted in the video analysis earlier this week.
“I think there will be a top sometime in late November or in the second half of November. it can drag on until the beginning of December. "
Institutions don't sell
In this case, $ 16,000 was returned, with the release time prior to Wall Street opening being $ 16,250.
Aside from retail banking, institutional investors stick to BTC for a noticeably long time, and according to statistician Willy Woo, capital inflows prove it.
"Weekend trading setup: shaking off some bearish technical details (4h RSI div, 8h TD9)," he told Twitter followers on Saturday.
“The short and medium term fundamentals on the chain are bullish, more coins have been withdrawn from the exchanges, more users have arrived. Buy the dip scenario. "
Woo was referring to the decreasing number of coins held in exchange order books, a phenomenon that has marked recent price hikes above $ 11,000. Instead of speculating, investors are storing coins elsewhere, indicating a desire to hold onto for the long term.
Fundamentals are trending up
Signs of bullish change are already pervading Bitcoin's fundamentals, despite mounting warnings of a drop in prices.
Estimates by monitoring resource BTC.com on Monday show that Bitcoin's mining difficulty will increase by around 4% in the coming hours. It is estimated that the most recent automated adjustments for difficulty predicted a decrease of about 6% but later a reversal of direction.
Increasing competition among miners follows a sharp drop in difficulty levels two weeks ago, which at 16% was Bitcoin's biggest drop since 2011.
Analysts have found that difficulty is arguably the most important technical characteristic of Bitcoin. Adjustments to the long-term time frame in connection with the halving of the block subsidies every four years have consistently protected the network independently of external help.
“The difficulty adjustment ensures that only that much electricity can be brought onto the market every day. What that means for the price is interesting as it calms the urge to drive the future halving events, ”wrote Preston Pysh, co-founder of The Investor's podcast network, on a now popular Twitter thread posted last week.
Bitcoin 7-day average hash rate 2-month chart. Source: Blockchain
The data continues to show that the hash rate – an estimate of how much computing power is used to validate the Bitcoin blockchain – is returning to growth after its own decline.
How much extreme greed is possible?
Avoiding a fall in Bitcoin prices doesn't look good, a popular investor sentiment indicator warns Monday.
The latest readings from the Crypto Fear & Greed Index suggest that a correction for BTC / USD is almost guaranteed.
Fear & Greed uses a basket of factors to measure sentiment among BTC investors and is firmly in the “extreme greed” zone with a score of 90/100.
Historical chart of the Crypto Fear & Greed Index. Source: Alternative.me
In context, it was only at the height of the bull run last year that the index topped its current highs. As Cointelegraph reported, however, analysts argue that 2020 has resulted in much more "organic" and therefore more sustainable growth in the price of Bitcoin.