A minor rebound in the US dollar market prompted Bitcoin to reverse its upward momentum on Monday.
The benchmark cryptocurrency fell by more than $1,000 in the early morning European session, hitting an intraday low at $22,430. So it appears, Bitcoin’s latest downside move came as a correction to neutralize its overbought conditions. The BTC/USD exchange rate topped near $24,300 on Sunday, after rallying by 127 percent in 10 weeks.
Bitcoin flips uptrend after logging $24,300 as its record high. Source: BTCUSD on TradingView.com
Meanwhile, the US dollar—which typically trades inversely to Bitcoin—also attempted to rebound from its overbought conditions. The greenback rose 0.78 percent on Monday as its demand in Europe surged after the UK imposed fresh coronavirus restrictions.
The country, already battered by the Brexit uncertainty, became host to a new strain of coronavirus that, according to the UK Health Secretary Matt Hancock, is 70 percent more transmissible than its predecessor. Nevertheless, the so-called “VIU-202012/01 variant” may not pose more danger and is not vaccine-resistant.
The US dollar index is down 11.80 percent from its mid-March top of 102.99. Bitcoin is up 487 percent within the same period.
Leading Bitcoin traders believe that its drop on Monday appeared in the wake of a trading gap on the futures chart.
In retrospect, Bitcoin Futures listed on the Chicago Mercantile Exchange left behind a missing candle over the weekend. People think spot rates tend to move in the direction of these missing spaces to fill them 9 out of 10 times. So with its latest move, spot Bitcoin was only attempting to fill the gap.
Bitcoin Futures gap filled after the spot prices move lower on Monday. Source: BTCUSD on TradingView.com
There are now two more missing candles requiring to be filled in the coming session. A pseudonymous trader higher it in the chart above, raising prospects of the Bitcoin price to fall even further towards $18,115 and $16,995.
Bitcoin Technical Outlook
The US dollar’s medium-term outlook is bearish thanks to the Federal Reserve’s commitment to continuing its bond-purchasing program indefinitely and the US Congressional leaders’ decision to pass a $900 billion stimulus to assist small businesses and American households suffering the economic consequences of the COVID-19 pandemic.
Bitcoin short-term price outlook. Source: BTCUSD on TradingView.com
That paints a rosy technical picture for Bitcoin—at least on the lower timeframe charts. The cryptocurrency’s one-hour chart shows the price in a consolidation trend even after its latest bearish act. It notes that BTC/USD could still rebound towards or above $24,000.
“Given the increasing demand from institutional investors,” adds Konstantin Anisimov, Executive Director at CEX.IO, “who are looking to hedge against inflation, the flagship cryptocurrency could double in price within months after achieving such a milestone which will help it surpass $90,000 by the end of 2021.”