Bitcoin is in danger of extending its ongoing bearish correction as it breaks below the line of ascending support line drawn from March 2020. On September 30, the BTC / USD pair fell below this line and flip it into resistance.
Recently, the price has re-tested this line twice to find a breakout, with no success.
The analyst on TradingView also spotted a descending trend line on the US dollar index (DXY) chart. He notes that the index’s recent rally pushed the price above this line and turned it into support.
DXY then re-tested this line twice, similar to how Bitcoin tried to climb above its ascending support line on twice.
“From a [pure] technical point of view, we can see that Bitcoin has broken below the ascending support line, and is in the process of retesting this line for the second time. While DXY is also testing it. level of support for a second time. With all that considered, we can assume that Bitcoin will have some correction in the near term. ”
Fundamental principles also agree
The macro fundamentals have been supporting Bitcoin’s bearish momentum in the near term, the analyst added.
He noted that increased volatility in the stock market ahead of the US Presidential election on November 3 would fuel greater demand for the US dollar. Despite Bitcoin’s safe-haven state, people will want to keep cash more than anything else. Part of the reason is also the close correlation between cryptocurrencies and US stock indices.
“For example,” explained the analyst, “the COVID19 incident has caused the dollar to rise strongly, this is due to investors’ preparations for a possible recession caused by this pandemic ( stocks also plummeted). After the miraculous rebound, we saw the US Dollar slowly falling and a clear recovery in the stock market, taking Bitcoin with it.
That increases the likelihood of Bitcoin consolidating or correcting lower in the coming sessions.
The long-term trend of Bitcoin
Other analysts expect Bitcoin to rebound strongly after US election season. One of the main reasons why cryptocurrencies remain in the grip – according to them – is the absence of a second corona virus stimulus.
The dollar’s inflationary outlook has spurred mainstream companies to allocate their cash to Bitcoin. Recently, Square, Microstrategy, and several other companies have invested hundreds of millions of dollars in the cryptocurrency market.