- Bitcoin has started the week in a great position, having finally broken through a key resistance area
- Both Bitcoin ad many alts look set to continue their rally
- However, the DXY could have other ideas
It’s not exactly breaking news to say that the crypto market has been enjoying a resurgence of late, but expansion past $24,300 has been stifled for seven months. This has finally been broken, but right at a time when the U.S. Dollar Index, too, is showing signs of real strength. Let’s see how the land lies at the start of another week.
Bitcoin Finally Breaks Through
As we can see from the weekly chart, Bitcoin has started the week above the level of resistance at $24,300 that has been keeping it at bay since July last year:
This puts Bitcoin in a very promising position for a move further north, a sentiment echoed by the weekly view of the total market cap:
The momentum is definitely with bulls, with many alts enjoying double or even triple-digit gains on a daily basis. This is despite regulators such as the Securities and Exchange Commission coming after crypto on an almost daily basis, and mainstream media outlets echoing the negative sentiment. With the Ethereum Shanghai upgrade only weeks away, Ethereum and other related alts have an even more bullish narrative backing them.
DXY Looks Equally Strong
However, despite the good technical setup for Bitcoin and many alts during this bear market rally, there is a blot on the horizon in the shape of the U.S. Dollar Index:
Anyone with even the most rudimentary charting skills will be able to see that the DXY is on the verge of turning its own resistance, dating back to late 2016, into support, which is a big warning sign for Bitcoin and other risk-on assets. With the right narrative, the DXY could easily make a run back to 108, which would be devastating for Bitcoin. It may also be in the middle of its own bull run, in which case we could see something like this play out:
This would have the effect of sending Bitcoin back below $20,000, but it would need a special set of circumstances, such as the Federal Reserve to go even harder with its interest rate rises and crushing any hope that the mini-revival with the stock market is just that, to see it take place.
It just so happens that this week will see the release of the Federal Reserve’s preferred inflation measure and the minutes from its latest policy meeting, which will undoubtedly have an effect on both the DXY and legacy markets, which will, in turn, have an effect on Bitcoin. If the Fed hints that its recent slowing down of inflation increases was a mistake, then we can expect the DXY to enjoy a potentially damaging rally as risk-on investors flock to the safe haven of the dollar.