- Bitcoin is still struggling in the wake of a rejection of $41,000
- Several narratives, including the negativity around the ‘death cross’, are not helping the price
- A surge in the dollar last week could also help precipitate a further decline
Following last week’s rejection from $41,000, Bitcoin has started the week in a position of weakness, staring once more down the barrel of $30,000. This inability to break out of a month-long range has coincided with the much discussed ‘death cross’ and a bullish U.S dollar, which could further hamper any immediate recovery plans.
Bitcoin Still Recovering From $41,000 Rejection
Bitcoin is starting the week still recovering from last week’s key rejection of the $41,000 level, a rejection that resulted in a collapse to $33,300 yesterday:
With every minor bounce on the way down being sold into and causing further downside, momentum clearly still favors bears. When combined with the narrative of the ‘death cross’ which took place on Saturday, a retest of $30,000 is becoming more and more likely.
Whether you believe that the death cross, which is where the 200-day moving average crosses the 50-day moving average, is a bearish indicator in and of itself, the negativity associated with it could be enough to frighten buyers away.
Resurgent Dollar Could Further Dampen Recovery
Another reason why we could be seeing further decline in the Bitcoin price is down to the U.S. Dollar Index. The correlation between the Bitcoin price and the U.S. Dollar Index is something that we have referenced in the past, and with good reason – the year-long 2017 and 2020 bull runs both coincided with prolonged drops in the DXY as investors sought alternatives to a crashing dollar valuation.
The U.S. Dollar Index has been in a steady downtrend ever since the coronavirus hit the markets in March 2020, finally hitting a six-year support line shortly after Bitcoin temporarily topped out in January 2021. It now seems to have used that as a firm support line, bouncing off in one of its biggest ever weekly candles last week:
As we can see, the U.S. Dollar Index is now approaching a crucial resistance level. If it can breach this level we could be in for another run similar to 2016 and 2018-19, reflecting the increasing strength in the U.S. economy and the end of cheap money.
This isn’t to say that Bitcoin would automatically drop if the DXY did increase, but Bitcoin’s current place in the cycle combined with a probable migration from commodities and similar assets back into the dollar would very likely put the brakes on any thoughts of a quick response, and could even be the catalyst that sends Bitcoin under $30,000, if only temporarily.