Bitcoin is seeing its worst daily performance since September as it is currently falling 10% below $ 60,000. On the flip side, the U.S. dollar rose to its best level in 16 months after spending in the U.S. retail sector spiked amid concerns over Covid-19 and inflation.
Bitcoin price hit an intraday low of around $ 58,600 but regained $ 60,000 in psychological support. The decline comes when President Joe Biden signs a $ 550 billion infrastructure bill that introduces new tax reporting requirements for crypto users.
“Some people took advantage of yesterday’s news (Infrastructure Bill) to influence the market and collect Bitcoin at a bargain price.”
DXY has grown a lot
The dollar continued its upward momentum as US retail store sales rose 1.7 percent in October, up from 0.4 percent the previous month. This provides further evidence – following an excellent report on non-farm payrolls (raw materials, construction and manufacturing) last week – that the U.S. economy has rebounded sharply from the lows caused by Covid-19.
As a result, investors raised their bids against the dollar in anticipation that the Federal Reserve’s cut of its $ 120 billion monthly purchase program has stayed near zero since March 2020.
The Dollar Strength Index (DXY), which measures the performance of the dollar against a basket of leading foreign currencies, hit 95,821 on November 16, its highest level since July 2020. In contrast, Bitcoin capital has risen sharply over the years compared to the low interest rate environment 2020 and 2021 has withdrawn.
DXY. Weekly price chart | Source: TradingView
Analysts predict the dollar will continue to rise in the coming months, with market analyst Scott Melker predicting the DXY will hit 97.5. The core of Melker’s bullish outlook is the establishment of a “double floor”.
Specifically, a double bottom occurs when price makes two lows above a similar horizontal level to indicate a potential bullish reversal. Bullish confirmation occurs when price breaks a certain level of resistance – the high between two lows – to a target level along the length of the maximum height of the pattern.
So it looks like DXY has broken out of a similar raised floor setup as shown in the graphic below.
DXY chart daily frame setting double bottom | Source: Scott Melker, TradingView
Bitcoin struggles with mixed outlook
Bitcoin more than doubled in 2021 due to mounting inflation concerns. Nigel Green, CEO of DeVere Group, noted that Bitcoin could continue to appreciate in value through at least the second quarter of 2022, as the U.S. consumer price index (CPI) recently soared to a three-decade high.
“These latest US data will only compound global inflation concerns as price pressures mount around the world. During this inflationary period, Bitcoin outperformed gold, which is being hailed as the ultimate inflation hedge almost everywhere – by far, “noted Green.
Daily frame bitcoin price chart | Source: TradingView
Vijay Ayyar, Asia-Pacific director of Singapore-based exchange Luno, has called Bitcoin’s ongoing correction a “healthy retreat,” especially after the year-to-date rally of over 175% to $ 69,000.
“It would be unusual to continue to rise without a correction.”
On the flip side, Joel Kruger, a currency strategist at LMAX Group, says tighter Fed policies will impact the broader market and hit the riskiest assets, with the dollar rising.
Martha Reyes, director of research at digital asset firm Bequant, calls Bitcoin “a venture capital investment,” claiming that people want to raise cash from the most profitable assets of all time.
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According to Cointelegraph