- Bitcoin has remained above a key $58,000 level after a big selloff
- Bitcoin dropped from $69,000 to $58,500 in just over a week
- The U.S. Dollar Index is also looking in a mean mood, which traditionally bodes ill for Bitcoin
Bitcoin’s unconvincing response to hitting $69,000 last week has proved to be a forerunner of things to come, with levels dropping ever since and any rebounds being firmly rejected. As usual mainstream media outlets were looking for reasons for the drop, with everything from the Infrastructure Bill being signed into law to the Mt. Gox payout agreement being finalized as to why Bitcoin has experienced a $10,000 drop. Of course we can’t discount these as factors, but often it’s just whales trying to push the price down to fill their bags, which is one of the reason’s the SEC rejected the VanEck spot Bitcoin ETF last week.
Bitcoin Weekly Still Looks Good
Back to Bitcoin, and a look at the weekly chart shows us that there is no cause for alarm:
Bitcoin may have gone the long way about it, but it has essentially turned what was resistance in March and April into support…assuming this current level holds. If $58,800 marks the bottom of the drop then we can start to believe that a period of consolidation will take place over the next 2-3 weeks before Bitcoin begins on another leg in the run up to Christmas.
This suggestion would be invalidated if Bitcoin were to drop and close the week below $58,000, in which case we would be looking at the low $50,000s and a more concentrated period of consolidation.
U.S. Dollar Index Could Play a Part
Another factor that Bitcoin supporters need to bear in mind is the incredible strength of the U.S. Dollar Index (DXY) which tends to be inversely correlated to that of Bitcoin. Since forming a double bottom in the first half of 2021, the DXY has been on a tear, taking money away from risk-on assets like cryptocurrencies:
There could be some respite if the DXY is out of steam here and falls back to the 94.5 region to test it as support, a period that would allow Bitcoin some breathing space, but after that it would certainly be wise to pay attention to the DXY, given that its range high is over 100 and it will suck liquidity out of all markets if it looks in the mood to follow through.