A sharply lower US dollar rallied against a host of fiat currencies last week and pressured riskier assets including bitcoin (BTC). However, the main cryptocurrency held at key support levels in a positive sign for the market.
The US dollar index (DXY), which measures the currency’s performance against other fiat currencies, gained more than 1.3%, registering its biggest one-week percentage gain since February, according to data from TradingView charts platform gone up.
Bitcoin fell 5.8% and lived up to its reputation of being negatively correlated with the US currency. However, sellers were unable to break below the 200-week SMA, a widely tracked technical line that capped the rally in February.
“By defending this key average, the bulls managed to convince the market of the sustainability of the long-term uptrend,” Alex Kuptsikevich, senior market analyst at FX Pro, said in an email.
According to Kuptsikeevich, the cryptocurrency needs to reach $28,500 to attract cautious buyers who are waiting for more concrete evidence of the end of the price pullback. At press time, bitcoin was trading around $27,400, up 1.4% the following day after hitting a peak of $31,000 last month.
Some observers expect the US dollar to continue rising and keep a check on the cryptocurrency’s gains.
“I think the US dollar is poised for a rally as markets pick up on some of the Fed’s easing on the futures curve. My basic framework is this: Currencies move based on real growth differentials and longer-cycle political views, but In the short term it’s all about playing out relative central bank policy (nominal rate changes). Depending on how strong the dollar rally is, this could cause some short-term damage to assets like commodities and cryptocurrencies,” Ilan Solot, Digital Assets and derivatives engine at Marex, explained in an email.
For their part, analysts at SwissBlock expressed a similar view in a note sent to their clients on Friday.
“DXY may go up to 104-107 from mid-March as it has topped 102 points,” said analysts. strong.
SwissBlock Insights expects the US Dollar Index to return to a downtrend after a brief rally. (Swissblock Technologies)
According to SwissBlock Technologies, the impending rally in the US dollar is likely to pave the way for a deeper decline that could benefit the cryptocurrency.
“The one-month structure will break at some point, and both assets will post a price discovery: bitcoin up and DXY down,” SwissBlock Insights said.
Furthermore, Solott expects the pullback in bitcoin to be short-lived and provide investors with a “great entry point to position themselves.”
Wallets known to hold coins for at least six months have hoarded the values during recent bouts of weakness, indicating confidence in the cryptocurrency’s long-term prospects.
