December 4, 2020

The last barrier to the bull market euphoria

Bitcoin price is again close to $ 12,000 resistance, overcoming of which may signal about the beginning of a large-scale bull market.

BTC price should have kept a critical levelsupport $ 11.000– $ 11.300, and she did it. After the support test, the price continued to rise and has now reached the critical resistance level of $ 11.900– $ 12.200.

This movement took place against the background of a weakening dollar - the US dollar currency index (DXY) dropped significantly. This correlation is valid throughout 2020.

However, other cryptocurrencies have not yet followed Bitcoin - the sell-off continues on the altcoin market. Is the general attention shifting back to Bitcoin?

Most Important Weekly Resistance at $ 12,000

XBT / USD, weekly chart. : TradingView

The weekly chart clearly shows this criticalthe level that served as an obstacle for the price of BTC in previous years. These are resistances in the $ 11.700– $ 12.300 area. In case of a breakout of this level, a strong move to $ 17,000 is likely to be expected.

It can also signal the start of a new cycle as more and more arguments are put forward in favor of a new bullish cycle.

However, this does not mean that a breakthrough is inevitable,as the structure of the market appears to be conducive to continued price fluctuations in a limited range. The main argument in favor of a breakout may be the weakness of the US dollar.

The dollar has been showing weakness since the global market crash in March, which has led to soaring prices for gold, silver and bitcoin.

The DXY index is at a breaking point and is close to continuing the downward impulse

Currency index of the US dollar, 1-day chart. : TradingView

DXY is an excellent indicator for identifyingfurther momentum in safe haven assets like gold, silver or bitcoin. Of course, when a pronounced crisis occurs in the markets, capital flight seems to be expected to cash, and primarily to the dollar.

However, recently, on the contrary, there isescape from the dollar. One of the main arguments in favor of such a weakening of the DXY is the endless "quantitative easing" conducted by the Fed, over and over again announcing new trillion-dollar stimulus packages.

While the dollar was showing weakness, bitcoincontinued to grow - also since the March collapse. Similarly, in recent days, the dollar currency index failed to overcome the resistance at 94.64 points and continued its free fall.

The last support separating the dollar fromthe continuation of the downtrend is at the level of 93 points. In the event of a breakdown, new lows for the dollar index are inevitable, and this will only add upward momentum to bitcoin.

Gold feels great in times of uncertainty in the dollar market

Gold and DXY, weekly chart. : TradingView

As you can see from the chart, the dollar has been showing weakness since the dot-com bubble burst and has corrected significantly since then.

In the same period, gold strengthened against the backgroundweakness in the dollar rose 600%. In the first part of the crisis (in 2000, against the backdrop of capital flight to cash), gold fell by 30%, but then not only recovered, but also increased significantly.

Similar correlation in recent monthswas also observed in bitcoin, which began to move in step with gold. The conclusion is that investors are looking for safe assets that hedge the risks of a weakening US dollar.

How about altcoins?

BTC dominance index, 1-day chart. : TradingView

Recent Bitcoin moves are crashing altcoins. The direction of movement of BTC does not matter. Altcoins are rolling down like an avalanche of stones.

It is difficult to interpret as a strong signal formarkets as it indicates that all investors' attention is focused on bitcoin. When bitcoin rallies and altcoins sell off, it means that money is flowing from altcoins to bitcoin. And if this happens against the backdrop of small BTC price movements, it is definitely not a sign of the strength of the markets.

In this respect, the markets look cyclical: the fourth quarter has traditionally been terrible for altcoin investors. Historically, the Bitcoin Dominance Index chart has a tendency to rise throughout Q4 and top in December.

This chart coincides with the trend of the ETH / BTC rate, which also often reaches a low point around December.

With regard to the near future, it is very likely thatthat Bitcoin's dominance will rise sharply and altcoins will continue to sell off. The most important indicators for the markets in the short term can be the strength of ETH and, accordingly, altcoins in relation to BTC, as well as the movement of the US dollar currency index.

The article does not contain investment recommendations,all opinions expressed are solely the personal opinion of the author. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently.