Bitcoin (BTC) is showing the potential to extend its ongoing price rally to $25,000 by March, based on a mix of bullish macro and technical indicators.
Bitcoin price breaks out of the descending channel range
First, the potential for Bitcoin to reach $25,000 comes from its exit from a prevailing descending channel range.
Bullfight or bull trap?
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In particular, the price of BTC broke out of the range late last week while accompanying an increase in its trading volumes. The cryptocurrency’s bullish move also pushed the price above its confluence of resistance, which comprises a psychological price top of $20,000 and its 20-week exponential moving average (20-week EMA; the green wave) near $19,500, as it’s shown in the following.
BTC/USD 1-week candlestick chart (Coinbase). Source: TradingView.com
Breaking three resistance levels on strong volumes shows traders’ belief in a prolonged price rally. Should it happen, Bitcoin’s next bullish target appears at its 200-week EMA (the yellow wave) at around $25,000, up 20% from current price levels.
Dollar forms a “death cross”
Bitcoin’s bullish technical outlook comes against the backdrop of a relatively weaker US dollar, due to expectations that the Federal Reserve will stop raising interest rates due to lower inflation.
The two assets have moved inversely against each other mainly since March 2020. As of January 16, the daily correlation coefficient between Bitcoin and the US Dollar Index (DXY), a barometer for measuring the strength of the dollar against the main rival currencies, was -0.83. , according to TradingView.
BTC/USD and DXY correlation coefficient. Source: TradingView
A traditional technical setup sees more losses for the dollar ahead.
Nicknamed the “death cross”, the setup appears when an asset’s 50-period moving average crosses below its 200-period moving average. For the dollar, the death cross is showing downward momentum, meaning its short-term trend has underperformed its long-term direction.
DXY daily price chart. Source: TradingView
“More downside expected in the medium to long term,” independent market analyst Crypto Ed saying on the dollar, adding:
“Asset risk should bounce more on that. Or rather: I expect BTC to break its bear cycle as the big run on DXY is finite.”
Not a Long-Term Bitcoin Price Rally
Bitcoin is up 30% above $20,000 in 2023 so far. But on-chain data shows that the buying trend lacks support from institutional investors.
Related: Bitcoin Gained 300% in the Year Before the Last Halving: Is 2023 Any Different?
For example, the total amount of Bitcoin held by digital assets such as trusts, ETFs, and funds has declined during the coin’s price rise in recent months, according to CryptoQuant’s Fund Holdings Index.
Bitcoin fund holdings. Source: CryptoQuant
Furthermore, unusual transactions did not occur on-chain, but rather on crypto exchanges, based on comparisons made between CryptoQuant’s fund flow ratio and token transferred metrics.
BTC/USD vs. transferred token (orange) and fund flow rate (blue). Source: CryptoQuant
The Token Transferred metric shows the number of coins transferred in a specific time period. While the flow of funds ratio represents the ratio between the coin transfers involving the exchange and the overall coin transfers across the entire network.
“Usually at the bottom, institutional investors want to buy quietly through OTC trading,” noted market analyst MAC_D, adding:
“This trade was simply actively traded only on the exchange, and no unusual on-chain transactions occurred. […] Today’s institutional investors have been quiet and just watching. OTC trading will be dynamic when they expect a complete uptrend reversal.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
This post Bitcoin Could See $25K By March 2023 When US Dollar Prints ‘Death Cross’: Analysis
was published first on https://cointelegraph.com/news/bitcoin-could-see-25k-by-march-2023-as-u-s-dollar-prints-death-cross-analysis