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Markets Report: Bitcoin Delays $19,000 as Fresh Dollar Weakness Ensues

$19,000 resistance proves stubborn and opinions vary about whether the short-term future is up or down for Bitcoin

Bitcoin is taking aim at $19,000 as the week begins—can more major levels flip to support or will the market see a major correction?

After a fairly volatile weekend, BTC/USD is circling $18,500 in Monday trading prior to Wall St. opening bell. $19,000, however, remains untouched.

Modern Consensus takes a look at what the future might have in store for Bitcoin over the coming days. We also publish a weekly roundup every Friday, the latest edition of which can be found here

US dollar slides with vaccine news

Another week and another boon for stock markets as news that a Coronavirus vaccine may soon be rolled out gets investors excited. 

Following on from last week’s gains, Asian stocks continued to climb, with anticipation building over similar moves in the US once trading begins. Fuelling the S&P 500, for example, may be the addition of Tesla to the index as well as the vaccine news.

On the flipside, the US dollar stands to lose out from the latest developments. A vaccine means that the USD “safe haven” bet is less sturdy, as other countries have a chance to recover through the cancellation of virus restrictions.

Signs that the future may not favor the dollar are already reflected in its declining purchasing power, with the US dollar currency index (DXY) falling sharply on Monday to challenge support at 92.

The US dollar currency index (DXY) is retesting multi-month lows. Source: TradingView

As Modern Consensus has previously reported, DXY has displayed inverse correlation with BTC in 2020, and long-term weakness has come hand in hand with price gains for the largest cryptocurrency. With DXY now down 2.4% in a month, the outlook appears to favor continuation of the trend.

“Global stocks start the week on the front foot on vaccine optimism as vaccinations against Covid-19 in US will ‘hopefully’ start in less than 3 weeks,” market commentator Holger Zschaepitz summarized on Monday, adding that the euro is also following the dollar downhill as the Eurozone reenters recession.

Highlighting a recent investor survey from Bank of America, however, he noted that fund managers still favor emerging markets and stocks to outperform in 2021, with Bitcoin far lower down on the list. 

Supply and demand keeps analysts excited

Their perspective could not be further from the mood among Bitcoin proponents. As BTC/USD managed to broadly preserve $18,000 support over the weekend, PlanB, creator of the popular stock-to-flow-based Bitcoin price prediction models, gave the start of next year as the rough starting point for even bigger gains.

“Current #bitcoin price action is nice, but we are waiting for a real jump (like the red arrows early 2013 and 2017). IMO that will be the start of the real bull market, and indeed phase5. January 2021?” he tweeted alongside a comparative chart.

Bitcoin’s price leaps after halvings are plain to see. Source: PlanB/ Twitter

Stock-to-flow produces conspicuous similarities in Bitcoin price action in the period following block subsidy halving events. 2020 is primed to continue the pattern, particularly thanks to both a lower flow of new bitcoins entering the market and an explosion of corporate buying from the likes of Grayscale, Square’s Cash App and PayPal.

“Monday! Paypal, Grayscale and Square will resume buying today,” PlanB added in his latest tweet.

This simple equation of supply and demand is slowly engulfing the Bitcoin space, as a reliably fixed issuance which drops roughly every four years places Bitcoin’s fundamental differences under the spotlight before a wider and wider audience. 

Difficulty and hashrate cancel out bearish moves

On the topic of fundamentals, under the hood, Bitcoin is returning to its robustness from before the latest price gains. 

Both network difficulty and hashrate are U-turning on their previous downtrend and heading higher—and are already within striking distance of all-time highs. Difficulty is set for a 7.7% increase at the end of the week, while weekly average hashrate has added 30% in three weeks.

As the popular saying goes, “price follows hashrate,” and continued commitment from miners in the form of rising fundamentals is traditionally good news for hodlers.

“#Bitcoin price is catching up to recent hashrate acceleration. There’s an inferred equilibrium point around $35,000 assuming no change in HR trends,” RT host Max Keiser predicted last week. 

Keiser suspects that Bitcoin will only pause for breath at $28,000 should it retackle its $20,000 all-time highs. Arguing for a pullback, however, traders are eyeing buyer support several thousand dollars lower as a potential price floor. 

“Overall we are cautious given the price move and have clear (lower timeframe) objectives to pay attention to around $17.8k,” popular analyst filbfilb, co-founder of trading aid Decentrader, summarized in a market update on Sunday.  

“A move higher and we will be looking at the Philip Swift Golden ratio multiplier target around $19k.  Downside corrections, we will be looking to trade back in around key fib retracement levels.”

Swift, founder of monitoring resource Look Into Bitcoin, created the Golden Ratio Multiplier tool in 2019 to identify Bitcoin price tops.

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Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.