Bitcoin reclaimed $30,000 in the late Wednesday session after falling briefly below it due to a rebound in the US dollar.
Entering Thursday, the flagship cryptocurrency was holding itself above $30,000 throughout Asia and the ongoing European session. That raised expectation of further gains as the market enters an uncertain US session.
“The ability to sustain above $30,000 favors Bitcoin vs. the Dow Jones Industrial Average if past patterns are a guide,” said Mike McGlone, senior commodity strategist at Bloomberg Intelligence. “In 2020, breaking away from 1x vs. the Nasdaq and 10x vs. gold were key milestones for Bitcoin. We see parallels in 2021 at about 1-to-1 vs. the Dow.”
The US stock market suffered its worst one-day decline since October on Wednesday, with the Dow Jones falling by 2.32 percent to 30,303 points.
Nevertheless, Bitcoin rose against the declining risk-on sentiment, illustrating its intentions to break away from its stock market correlation after [erratically] maintaining it since March.
Cash Warning
While the stock market fell owing to investors’ shift to the US dollar, Bitcoin sustained the shock, thereby illustrating that its traders anticipated the dollar to resume its downtrend.
A similar warning came from Simon Popple. The author of the Brookville Capital Intelligence Report told Kitco News that investors should not hold records amount of cash, explaining that they are taking unnecessary foreign exchange risk.
“Cash is not without risks,” he said. “Investors should hold some gold to mitigate a loss of their purchasing power.”
Bitcoin presents itself as an alternative to gold because of its anti-inflation, anti-fiat narrative.
Many strategists, including the ones from top asset management firm Blackrock and Bank of Singapore, believe that Bitcoin could mousetrap a significant portion of the gold market owing to its better storage and transferability.
The expectations have led billionaire investors Paul Tudor Jones and Stan Druckenmiller to purchase Bitcoin as an alternative to gold against their fears of dollar debasement. Meanwhile, a flurry of private and public traded firms are collectively holding 1.22 million BTC worth $38.8 billion in their reserves.
What’s Next for Bitcoin?
Short-term, Bitcoin is choppy.
The BTC/USD exchange rate is fluctuating inside a range defined by its 20-day and 50-day moving averages. Meanwhile, breaking above or below either of two waves expect to define the pair’s short-term bias.
A break below the 50-DMA risks activating the Descending Triangle pattern. That said, BTC/USD could fall by as much as the Triangle’s height to targets its breakout target. It would mean seeing the pair near $20,000.
Fundamentals don’t support such a vast downside correction. The Federal Reserve’s commitment to purchase bonds at a rate of $120 billion every month expects to keep yields lower. Meanwhile, an ultralow interest rate near zero would keep the downside pressure on the US dollar on.
In short, traders and investors have practically no attractive alternatives. Bitcoin expects to benefit from that—as it has done since the March 2020 crash with its 1,000% plus rally.
Therefore, one can expect bulls to buy the next price dip and recharge Bitcoin towards and above the 20-DMA (~$33,000). Long-term, the cryptocurrency could reclaim its record high near $42,000.
