Bitcoin (BTC) has risen nearly 30% since the end of June, from $ 8,905 to just under $ 11,500 at press time. After the strong rally in the dominant cryptocurrency, three overall factors indicate an optimistic trend in the medium term. These macro factors indicate a positive medium to long-term price cycle, but indicate that momentum will wane in the short term and that a period of consolidation will take place.

As Ark Invest CEO Cathy Wood discussed in the In the Know podcast, there is technically little resistance between $ 13,000 and an all-time BTC price of $ 20,000. Wood indicated that Bitcoin could see a new trading range between $ 10,000 and $ 13,000, which could lead to a healthy phase of consolidation:

“This $ 13,000 level is important because if we can get past this then there will be little technical resistance and we may be on our way back to the peaks we saw in late 2017 – around $ 20,000. We are not sure if this happens. We can stay in a new trading range. Only at a slightly higher level than in the past six to ten years. We might be in the $ 10,000-13,000 range. There is still an outbreak. ”

It remains uncertain whether Bitcoin will stay in the $ 10,000-13,000 range for a long time. Over the past three years, BTC has tended to consolidate from September to October and recover in mid-November. With the block reward activated, which will be halved on May 11th, the upside potential remains high from November to December.

The diminishing dollar benefits Bitcoin
One of the continuing accounts of Bitcoin’s long-term boom is the decline of the US dollar. Over the past few months, the dollar has depreciated against other reserve currencies, largely due to the epidemic and the difficulty of reopening the US economy again.

On July 31, Lee Hardman, a currency analyst at the Mitsubishi UFJ Financial Group, said the dollar sale was “unabated.” According to Suprea Menon, a multi-asset strategic analyst at Pictet Asset Management, many macro factors, including the growing number of COVID-19 cases and the uncertainty surrounding the November presidential election, have contributed to the weak dollar.

Meltem Demirors, CoinShares’ chief strategy officer, believes that periods of economic uncertainty and a weak dollar will likely benefit Bitcoin, as well as gold:

“Where is Bitcoin in the business cycle? In times of economic uncertainty and dollar weakness, #Bitcoin should benefit just like gold. If Bitcoin continues to be financed, it cannot remain insulated from the financial system.”

It remains unclear if the dollar’s waning momentum has actually fully affected the bitcoin price. The US dollar has already fallen to its lowest level in two years and analysts are expecting the dollar to recover in the near future.

There are two variables that could trigger a further decline in the dollar, which are low interest rates and the massive stimulus package provided by the European Union. The euro has outperformed the dollar in recent weeks as investors found the € 750 billion EU replenishment fund convincing. The US economic path to recovery has not been fixed consistently by the aggressive fiscal policy of Europe. Patrick Schwitz, global strategist at JPMorgan Asset Management notes:

“The United States. The economic outperformance against the Eurozone and Japan (at least not anymore) appears to be guaranteed at least over the next few years in light of the weak reaction to the virus. […] The decline in its interest rate advantage makes the US dollar less attractive. Investors are being forced to deposit in other currencies for their consideration These cyclical factors will not change anytime soon, and it is likely that the US dollar has more room to decline.

The dollar’s weakening over the medium term coincides with expectations of higher inflation. If bitcoin is seen by many as a store of value and a potential hedge against inflation, the upcoming speech by Fed Chairman Jerome Powell could bolster the BTC picture in the long run.

Powell is expected to deliver a speech at a hypothetical Fed conference on August 27 and will discuss weak inflation. For now, the markets are not expecting the Fed to make any significant changes to its monetary policy. Even if the Fed states that inflation rates may rise for a while, it may not have a profound effect on BTC.

Source: CoinTelegraph