Bitcoin Shakes Off Dollar Rebound But Beware Of Coming Bear Phase
Bitcoin has barely flinched in the face of the dollar’s best attempt at a rebound in over a year. The greenback is trying to stage a comeback against the top cryptocurrency, which has left the global reserve currency battered and beaten.
Although Bitcoin has fended off the advance in USD, if history repeats and the dollar surges, a short term bear phase could be coming to the crypto market soon.
The Badly Beaten Dollar Begins Breakout And Bounce
2021 thus far has been Bitcoin’s best year on record. 2020 was among the dollar’s worst as sentiment turned negative and inflation fears pushed investors toward hard assets like gold and crypto.
However, according to the DXY Dollar Currency Index, which weighs the dollar against a bucket of other national forex currencies, a comeback is in the making.
The chart above shows the DXY breaking out from a falling wedge pattern, and coming back down to retest the former resistance line as support. With the retest complete, a stronger push higher should result.
Coinciding with the breakout of the falling wedge, on higher timeframes, the MACD – a momentum indicator – is starting to turn upward. Past instances of the same pattern breaking upward combined with a bullish crossover on the MACD has led to sustained upside in the DXY.
How A Reversal In The Greenback Could Send Bitcoin Into A Bear Market
Although the leading cryptocurrency by market cap has shaken off the greenback’s rebound thus far, a bear phase could soon be coming that sets back the current uptrend for some time.
However, not all is lost for Bitcoin and the rest of the crypto market. An inverse head and shoulders on high timeframes might have completed on the DXY, which after a throwback to the trendline to confirm it as resistance, could result in the largest collapse in the dollar’s history, and its eventual undoing.