All-time highs next? Bitcoin holds $62K as the Dollar index tumbles to 3-week lows
The U.S. dollar index reached its lowest levels in three weeks on Tuesday, triggering the Rising Wedge pattern.
The U.S. dollar index (DXY) could continue its slide in Q4, according to a classic technical setup known as Rising Wedge. The greenback’s bearish prospects may boost Bitcoin’s (BTC) price to new all-time highs as BTC holds above $62,000.
DXY poised for another 1.75% drop
Rising Wedges are bearish reversal patterns that begin wide at the bottom but contract as the price increases. As a result, the trading range narrows, which makes the rally unconvincing. That typically prompts the price to break below the Wedge’s support line and later fall by as much as the maximum distance between the pattern’s trendlines.
DXY has been forming a similar price structure since August 2021. Moreover, the index’s decline this week had it break below the Wedge’s support line, therefore triggering a bearish setup towards 92.416, down about 1.75% below the level of breakout (~93.98).
A week ago, DXY had reached a one-year high of 94.563, reaping benefits from stagflation fears and the Federal Reserve’s decision to unwind its $120 billion a month asset purchase program in November 2021, followed by interest rate increases next year.
But the index dropped to its three-week low on Tuesday, underscoring that money markets have priced in the Fed’s tapering decision. Instead, their focus has shifted towards policy normalization elsewhere, including the United Kingdom, where analysts have forecasted rate hikes worth 35 basis points by the end of this year.
Bitcoin rallies on ETF FOMO
Bitcoin price found support from the weaker dollar this week, as well as optimism about the debut of the first exchange-traded fund (ETF) tied to BTC Futures on the New York Stock Exchange.
BTC/USD rallied by over 40% month-to-date to hit a five-month high of $62,987 Tuesday. A minor correction ensued, but Bitcoin held $62,000 as its interims support against a weakening dollar sentiment.
Technically, Bitcoin reached the bullish exhaustion level of its prevailing ascending channel range. With its relative strength index (RSI) also overbought with a reading above 70 on the daily timeframe, the cryptocurrency could undergo an interim price correction with a short-term support target near $60,000.
But long-term, multiple analysts anticipate the Bitcoin price to hit $100,000.
Tom Lee, the co-founder of Fundstrat Global Advisors, said in a note Monday that ETFs based on Bitcoin Futures would together attract more than $50 billion in inflows in the first year, adding that BTC could conceivably rise to $168,000 in response.
Related: BTC price is up 50% since China ‘selflessly’ banned Bitcoin mining
Jurrien Timmer, director of global macro at Fidelity Investments, noted that Bitcoin would become a six-figure asset by 2023, citing Metcalfe’s law, which measures a network’s value based on its growth rate.
“Other technology innovations, and even, like, a stock like Apple — not that I’m a security analyst — has gone through that same process, where its sales go up 38-fold over 10, 20 years, and its market value goes up by 900-fold,” Timmer told Yahoo Finance, adding:
“So it’s an exponential increase. And based on those metrics, by 2023, my models show $100,000.”
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