Only a flash in the pan – Bitcoin cannot turn Elon Musk’s support around
The past week has seen Bitcoin (BTC) experience strong volatility, causing the market-leading cryptocurrency to climb from US$32,000 to US$38,500 in 24 hours, only to fall back to US$33,000.
The surge to US$38,500 was nothing short of explosive and came shortly after celebrity entrepreneur Elon Musk added the hashtag #Bitcoin to his Twitter status.
However, the crypto market leader was unable to maintain this momentum, with the price heading back down in the Bitcoin Legacy hours that followed. Currently, the $34,500 mark is proving to be crucial resistance that needs to be overcome in order to revive the previous uptrend.
The crucial hurdles are marked in the price chart above. From this we can conclude that it will take a break of the US$38,000 level for Bitcoin to climb to a new record high.
As mentioned, yesterday’s bounce was not enough for that. After the price failed at the US$38,000 mark, the US$34,000 mark again failed to prove support, which means that the upward trend is now in danger.
The „Elon Musk upswing“ is therefore to be seen as a flash in the pan that has not sustainably boosted the current price trend. A downward trend has recently become apparent since the record high of 42,000 US dollars was reached. This downward trend will probably continue until the 34,500 US dollar mark can be cracked and established as support.
One of the main reasons for a further downturn for Bitcoin is the resurgent US dollar index (DXY). The dollar index is hinting at a bottom and a bullish crossover at the significant 90-point level.
If this bullish crossover is confirmed by a higher low, the index will probably continue upwards for the time being.
The previous uptrend in the dollar index in September had caused a 20% retracement in bitcoin in return. Subsequently, however, the dollar index was extremely weak, which was one of the driving forces behind bitcoin’s record run to $42,000.
February is generally a bad month for the stock market, and this now seems to be true for Bitcoin as well, as in February 2018 the crypto market leader had crashed back to US$6,000 after hitting its then record high in the months prior.
So a new uptrend in the dollar index could bring about another weak February for Bitcoin.
Bitcoin market dominance about to take off
Past price charts show that market trends are often cyclical.
After Bitcoin recorded a peak in its own market share in December, the altcoins have since been gaining more and more ground. However, their gains are now also ripe for a downward correction.
This in turn could increase Bitcoin’s market share, which would open the door for a new upward trend for the entire market in March.