Analysts warn that U.S. dollar could return to its 2018 lows as Bitcoin fundamentals steam to new records this week.
Bitcoin (BTC) starts the week above $11,000 as fresh gains continue to hold — is $12,000 next or will bears gain control?
Cointelegraph takes five factors that could help decide whether this week is bullish or bearish for BTC price action.
U.S. election could send dollar back to 2018
Bitcoin remains sensitive to macro phenomena as Q4 continues, and the U.S. election run-up could produce noticeable turbulence.
The
outcome of a Democratic win looks bleak for one macro indicator in
particular: the U.S. dollar currency index (DXY), analysts say.
In a report on Oct. 12 quoted by Bloomberg,
Goldman Sachs warned that Joe Biden entering the White House could
spook markets in advance, driving DXY down to its lows from 2018.
Bitcoin
has historically seen strong inverse correlation with DXY, and fresh
lows could thus be a boon for hodlers. In August, $12,500 highs for
BTC/USD came in tandem with DXY dipping to just above 92 points. 2018
saw a dive to 89 — 4% lower than at present.
In addition, the roll-out of a coronavirus vaccine would serve to hinder, rather than help dollar strength.
“The
risks are skewed toward dollar weakness, and we see relatively low odds
of the most dollar-positive outcome — a win by Mr. Trump combined with a
meaningful vaccine delay,” Goldman strategists wrote.
“A ‘blue
wave’ U.S. election and favorable news on the vaccine timeline could
return the trade-weighted dollar and DXY index to their 2018 lows.”
Last week, Cointelegraph reported
an opinion that, regardless of who wins in November, safe havens will
win thanks to the election result, with one analyst eyeing a $4,000
price target for gold.
Europe battles Brexit and coronavirus
Regarding the coronavirus, fresh restrictions coming in across Europe are set to produce more economic concerns.
With
the “second wave” seemingly firmly underway, various countries are
seeking to enact repeated lockdown-style measures this week.
Amid
the turmoil, last-minute Brexit negotiations are adding to the headache
for the United Kingdom, with a deadline for reaching some form of
consensus on exiting the European Union now just days away.
In the
U.S., politicians have still failed to agree on a new stimulus package,
which Americans are eagerly anticipating after Treasury Secretary
Steven Mnuchin confirmed the issuance of a second $1,200 stimulus check.
Despite
the gloom, stocks are up, with S&P 500 futures gaining 0.25% prior
to the open on Monday. Leading the way is China, where a weakening yuan
and investors hopeful that an upcoming speech from president Xi Jinping
will serve to entice more foreign investment.
Hash rate high leads Bitcoin fundamentals
Not
so gloomy are Bitcoin’s network fundamentals this week. Depending on
the metric used, hash rate hit new all-time highs over the weekend,
suggesting that more computing power than ever is being dedicated to
mining.
According to data from monitoring resources Bitinfocharts and Blockchain,
hash rate hit 155 exahashes per second (EH/s). 130 EH/s marked a
tenfold increase versus when BTC/USD hit its record highs of $20,000 in
December 2017.
Hash rate is difficult to measure precisely, and
different tools produce different results, but the trajectory is clear:
Bitcoin miners are bullish.
As Cointelegraph often reports,
a popular theory suggests that highs in hash rate and jumps in network
difficulty tend to produce Bitcoin price rises later on.
“The
correct hashrate-adjusted price for #Bitcoin right now is approx.
$32,000 per coin,” Max Keiser, one of the theory’s main proponents, commented last week.
“Once we get through this 2018 supply overhang and legacy exchange wash-trading supply glut we’ll see new ATH.”
Difficulty
has yet to show signs that it will follow hash rate to new records in
the short term — estimates on Monday showed that the next readjustment
will be neither up nor down, just like the last.
Sentiment consolidates
Investor sentiment is slowly firming up when it comes to Bitcoin, according to the Crypto Fear & Greed Index.
Data from the market indicator shows that after August sparked warnings of overexuberance, a subsequent dip is now balancing.
On Monday, the Index was at 52, having passed the 50 mark for the first time since Sep. 21 over the weekend.
That
puts investor sentiment in “neutral” territory — a relief compared to
the “extreme greed” of August and the “fear” that followed.
The
Index aims to show when a market sell-off is due, typically the closer
its score gets to the top of its scale from zero to 100.
Volatility, market momentum and volume make up half of the weighted basket of factors which produce the score.
“We’re going much higher”
Lastly, despite few expecting its sudden push above $11,000, Bitcoin pundits are betting on further gains.
As noted
by Cointelegraph Markets analysts among others, the area around $11,000
previously formed a key area to break, with $10,800 acting as a “pivot”
point which could propel the market higher once reclaimed.
In the
event, BTC/USD took $10,800 and another important level, $11,150, in
its stride, sealing daily and weekly closes above that level and closer
to $11,400.
This came despite a mixed bag of news, which included the arrest of senior executives at derivatives giant BitMEX.
For some well-known names, the bullish mood is palpable.
“We're going much higher. You have been warned,” researcher Vijay Boyapati tweeted on Sunday.
Meanwhile, a survey from Cointelegraph Markets’ Michaël van de Poppe saw over 60% of 4,000 respondents bet on $12,000 appearing before $10,700 — below the pivot level.
source link : https://cointelegraph.com/news/dollar-dip-meets-hash-rate-boom-5-things-to-watch-in-bitcoin-this-week
