As the U.S. Dollar Strength Index reached a 16-month high, the price of Bitcoin fell below $60,000

Bitcoin (Bitcoin) Recorded its worst one-day performance since September, as the price of BTC dropped by 10% on November 16 to below 59,000 USD. On the other hand, despite continued growth in US retail spending, the US dollar jumped to its highest level in 16 months. COVID-19 fears and inflation concerns.

The price of BTC hit an intraday low of approximately US$58,600 on Coinbase, and then fell back higher, recovering US$60,000 as its psychological support. With U.S. President Joe Biden (Joe Biden) Signed a $550 billion infrastructure bill Become law, including new tax reporting requirements for cryptocurrency users.

Stronger retail data

At the same time, as US retail store sales rose from 0.4% last month to 1.7% in October, the US dollar continued its general bull market.This provides further evidence-after last week’s excellent non-farm payroll report-the U.S. economy has been rebound Strong from the lows of COVID-19.

As a result, investors have increased their bids on the U.S. dollar, and the Fed is expected to accelerate the reduction of its $120 billion monthly asset purchase program, resulting in Interest rate hike earlier than expected, Has been close to zero since March 2020.

this Dollar Index (DXY)November 16, which measures the performance of the U.S. dollar against a basket of major foreign currencies, hit an intraday high of 95.821, the highest level since July 2020. Retreated.

DXY weekly price chart. Source: TradingView

The dollar will rise further

Analysts expect that The dollar will continue to rise In the next few months, market analyst Scott Melker predicts that DXY will reach 97.50.

The core of Melk’s bullish outlook is the “double bottom” setting.

In detail, when prices form two lows at similar levels to indicate a potential bullish reversal, a double bottom will occur. A bullish confirmation occurs when the price breaks through a certain resistance level (the high point between the two bottoms) until the length of the target level is equal to the maximum height of the pattern.

So it seems that the US dollar index has broken through a similar double bottom setting, as shown in the figure below.

DXY daily price chart with double bottom setting. Source: Scott Melker, TradingView

Bitcoin’s prospects are mixed

Due to growing concerns about inflation, the price of Bitcoin more than doubled in 2021. Nigel Green, CEO of DeVere Group noted, The value of cryptocurrencies may continue to soar At least until the second quarter of 2022, quote the U.S. Consumer Price Index (CPI) Recently climbed to a three-year high.

He pointed out: “As global price pressures spread globally, the latest data from the United States will only exacerbate global concerns about inflation,” he added:

“In this inflationary period, Bitcoin has outperformed gold, and gold is almost universally hailed as the ultimate inflation hedging tool-until now.”

BTC/USD daily price chart. Source: TradingView

Vijay Ayyar, Head of Asia Pacific, Luno, a Singapore-based cryptocurrency exchange, Call Bitcoin’s continued correction is a “healthy correction”, especially after its year-to-date price has risen by more than 175% to $69,000.

“It is unusual to continue to rise without correction,” he pointed out.

On the other hand, according to Joel Kruger, currency strategist at LMAX Group, Said The Fed’s tightening policy will begin to put pressure on the broader market and deal the most serious blow to the most risky assets. This is the reason why Bitcoin and other cryptocurrency markets have been rising against the US dollar and falling back.

related: If the 2016 bull market halving repeats itself, Bitcoin will reach a peak of US$253,000 in this cycle, and Ethereum will reach US$22,000.

Martha Reyes, head of research at the digital asset company Bequant, also calls Bitcoin a “venture investment”, saying that people will hope to raise funds from the most profitable assets when they are under pressure.

At the time of writing, Bitcoin is trading at $60,625.

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Every investment and trading action involves risk, and you should conduct your own research when making a decision.