Following a dramatic drop almost to $89,000, Bitcoin (BTC) bounced back powerfully, recouping its losses and finishing the day above $94,000. Is this the final opportunity for the bears to hold on? Could we see the price return to its record high?
Has the Dollar Index (DXY) now topped out?
In larger financial contexts, risky assets such as Bitcoin were facing challenges. The Dollar Index climbed up to $110, while the yield on a 10-year U.S. government bond hit 4.8%. This strong dollar trend was causing difficulty for risky investments, as their values decreased in comparison.
The chart displayed here measures the U.S. dollar‘s value relative to other significant currencies (represented by the DXY index). Typically, a robust U.S. dollar is unfavorable for various assets, particularly riskier ones. You can see from the monthly chart that since March 1985, there has been a persistent downward trendline. Currently, the price has hit a substantial horizontal barrier around $110, and it’s likely that a reversal may occur at this level. However, should the price manage to breach this resistance, the outcome could be severe on a global economic scale. It’s worth noting that with the incoming Trump administration, there is a higher probability of them advocating for a depreciated dollar to prevent recession and stimulate growth in the economy.
From despair to hope
Approximately at 3:00 PM UTC+1, Bitcoin’s situation seemed grim. The price of BTC had dipped below both the neckline of the head and shoulders pattern and the uptrend line dating back to April 2021, suggesting that the previously dependable support might now be compromised as the price dropped to approximately $89,300.
As an analyst, I must admit that the market’s trajectory took a different turn from my expectations at this point. Contrary to my forecast, the recovery seemed to gather momentum. The price not only surpassed the ascending trendline and the head and shoulders neckline but also ended the day almost at its starting point. Now, we find ourselves with a significant candlewick below the price level, suggesting a potential reversal. This development reopens the possibility of a breakout above the $100,000 mark once again.
Bitcoin healthy consolidation
The Bitcoin weekly chart indicates that its price is steadily climbing at a robust pace. This trend may lead to either a bursting through or a refusal of the downward trendline, depending on the market’s response. Regardless, the price movement suggests a sideways consolidation, and following the rapid surge after breaking out from the extended downtrend channel, the market is still in the process of digesting that rally.
On the chart’s lower end, the Relative Strength Index (RSI) is subtly increasing. For the bull market to persist, the RSI line should ascend further and break the current downward trendline.
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2025-01-14 14:07