Bitcoin has experienced a significant breakthrough in the cryptocurrency market, surpassing the $35k mark for the first time in over a year. The rally began when Bitcoin broke through the horizontal resistance at the $32k area, a level that had provided resistance for quite some time.
While this is undoubtedly good news for bullish investors, there is a concern that Bitcoin’s divergence from the US dollar could be cause for worry. While Bitcoin gained ground against the US dollar, the greenback simultaneously rallied against other fiat currencies.
This divergence between Bitcoin and the US dollar is a significant concern for investors. If I were a Bitcoin investor (which I’m not), I would be worried. The strengthening of the US dollar since the first quarter of 2023 against other major currencies, such as the euro and Australian dollar, highlights the potential reversal in Bitcoin’s rally.
Despite claims that Bitcoin is not correlated with macro factors and market positioning, its inclusion in many institutional portfolios means that it does react to macro trends. Therefore, unless the US dollar’s strength dissipates and begins to weaken, there is a likelihood that this Bitcoin rally will be reversed.
Caution is necessary in these circumstances, as the outcome of Bitcoin’s future performance depends heavily on the trajectory of the US dollar. Until there is a shift in the dollar’s strength, investors should approach the situation with reservation.
Without mentioning the original author, it is evident that Bitcoin breaking the horizontal resistance and extending beyond $35k is a significant development. However, the divergence from the US dollar raises concerns for bullish investors, as the strength of the dollar could potentially reverse Bitcoin’s rally. It is crucial to monitor the macroeconomic factors and the US dollar’s trajectory to gain a clearer understanding of Bitcoin’s future performance.