(Kitco News) – Bitcoin (BTC) price consolidated above support at $58,000 for much of Friday morning, leaving crypto traders feeling left out as other asset prices, including stocks and spot gold, surged higher, with the yellow metal recording a fresh record high above $2,580 per ounce.
The rally across most assets has been widely attributed to a decline in the U.S. dollar amid an uptick in chatter about a potential 50 bps rate cut at
“The US dollar is falling against nearly all the world's currencies today amid heightened speculation that a 50 bp cut is still on the table for next week's FOMC meeting,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex. “In the derivatives market, the odds are the highest in several weeks. The ostensible trigger was apparently a news wire story by a reporter thought to be used by some Fed officials to foster communication. A few former Fed officials also seemed to endorse a half-point move.”
“Others saw the low PPI components as confirming a soft PCE deflator,” he added. “The odds in Fed funds market had fallen to less than 20% at the close on Wednesday from almost 33% at the end of last week. After the CPI, PPI, and what some see is possible planted story by the Fed, the odds are now slightly above 45%.”
“Still, the market is pricing in about 115 bp of cuts this year,” Chandler said. “That is virtually unchanged from last week's settlement. Today's import/export prices and the preliminary results of the University of Michigan's September survey are unlikely to change this very much.”
Thus far, the decline in the DXY has benefited gold and stocks, but cryptos have had little response to the development, suggesting digital asset traders are taking a wait-and-see approach.
“Cryptocurrency market capitalisation has changed little over the past 24 hours, falling 0.1% to $2.03 trillion,” noted Alex Kuptsikevich, senior market analyst at FxPro. “The sentiment index remains in the ‘Fear’ territory despite rising 1 point to 32 on Friday.”
“Bitcoin has found a balance between buyers and sellers, remaining at $58K,” he added. “The most active buyers seem to have temporarily switched to gold and equities. The daily chart shows a series of higher intraday highs, indicating a bullish advantage.”
BTC/USD Chart by TradingView
While Bitcoin has thus far shown little response to the decline in the DXY, according to TradingView analyst TradingShot, it’s only a matter of time before King Crypto heads higher.
“Exactly a year ago (September 25, 2023), we published a comparative analysis of Bitcoin against the U.S. Dollar Index (DXY),” he said, which outlined “the natural negative correlation” between them. “BTC rose immediately to its impressive October 2023 - March 2024 rally, just when DXY got rejected at the top of its Megaphone pattern.”
“We believe that, only a few days before the Fed cuts the Interest Rates next Wednesday for the first time in years, it is useful to update this chart,” he added.
“As mentioned, this correlation shows principally the negative nature between the two financial assets, but there are other parameters involved,” TradingShot said. “You can see that from late January 2024 to mid-March 2024, DXY started rising but BTC didn't decline. Instead, it posted an insane rally, which was solely attributed to the launch of the Bitcoin ETFs.”
“As this move cooled down, the market started correcting the rally's mania and even though the DXY started a strong decline in late June, BTC didn't raise but instead entered a 50k - 70k range because of the strong correction on the stock market,” he observed.
“So the obvious question that arises is 'what's coming next for Bitcoin'?” he asked. “Well, as you realized, that can be answered only in relation to the stock market and DXY moves. BTC is sitting currently on its 1W MA50 (blue trend-line), while the DXY on its 1W MA200 (orange trend-line).”
“Technically, if the DXY rebounds on its 1W MA200, Bitcoin should decline and vice versa. If DXY breaks its 1W MA200 (would be the first time since January 10 2022), Bitcoin should rally,” TradingShot noted. “However, that also depends on what the stocks do.”
“As a result, we believe that if the stock market rises, BTC will follow it upwards, regardless of what the DXY does (unless it accelerates so fast upwards that will break above the 107.370 Resistance),” he said. “If the DXY rebounds while stocks rise, there should be a BTC rally but just a moderate one. If DXY breaks below its 1W MA200 while stocks recover, we expect the rally to be much higher than most anticipate.”
“On the other hand, a further decline in stocks, combined with a DXY rebound, would translate into an aggressive sell-off on Bitcoin,” he warned. “If, however, stocks keep falling while the DXY makes the historic break below its 1W MA200, we expect the July - September consolidation on Bitcoin to be extended, so the trend should be sideways until one of those parameters/condition changes.”
At the time of writing, Bitcoin trades at $59,473, an increase of 3.10% on the 24-hour chart.
