The ongoing story for the past couple of months in the cryptocurrency market has been confusion on whether Bitcoin (BTC) is destined for another leg down or is finally ready to break out toward new highs.
Bitcoin’s price history and data from previous corrections suggest that the current struggles for the top cryptocurrency could persist for a little bit longer due to the strengthening dollar, the possibility of decreasing economic stimulus and a slew of technical factors connected to Bitcoin’s price action.
A strong dollar threatens Bitcoin’s recovery
According to data from Delphi Digital, one of the biggest factors placing strain on risk assets around the globe is the strengthening U.S. dollar which appears to be attempting a trend reversal after falling below 90 in late May.
Rising dollar strength put a halt to the year-long uptrend in the 10-year US Treasury yield which is also a reflection that the economic expansions seen in the first half of 2021 are beginning to lose steam and there is a threat that a new wave of Covid-19 infections threatening the global economic recovery.
Fractals and the Death Cross suggest the correction is not over yet
The short-term outlook for Bitcoin remains bearish as previous instances of the “Death Cross,” which appeared on BTC’s chart in late June, have been followed by a corrective period that can last for nearly a year.
According to the analysts at Delphi Digital, the 12-month moving average is being tested as support, and a dip below this level would signal further downside for BTC price.
The 12-month moving average has been a key support level for Bitcoin historically, so how the price performs near this level could dictate whether the current uptrend remains intact.
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Overall, caution is warranted for traders because low volumes have historically led to higher volatility when fewer open bids can lead to rapid price fluctuations.
As explained by Kevin Kelly, a certified financial analyst at Delphi Digital, “the short-term outlook turns quite a bit more bearish if and when we break those key levels” near $30,000.
Kelly said:
“I don’t necessarily think that we will see as nearly as significant of a drawdown as we did in say, post-December 2017, early 2018, and into the end of that year. But I do think, just given the structure of the market, that we could potentially be in for a bit more short-term volatility and potentially some more headwinds here, in the near term.”
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