Historically, the weakening of the US dollar has strengthened other safe haven assets. With correlation analysis, this progress and conclusion can also be made using bitcoins (BTC) and the US dollar.

Bitcoin gained in 2020 as the US Dollar Currency Index (DXY) was a difficult year. But will this momentum continue in the coming months? Let’s take a closer look at the charts.

The triangle burst as most markets waited for a peak, resulting in a rally against $ 11,700 and a breakout of the critical resistance area of ​​$ 11,000-11,200.

However, to maintain bullish momentum, support must hold the $ 11,000-1,200 range until the $ 12,000 resistance range is tested.

The weekly chart of Bitcoin illustrates the significance of the $ 12,000 resistance level. Since the bear market began, the $ 12,000 area has been a major obstacle.

This important barrier has led to several challenges in this area. However, there was no breakthrough. But by all accounts, the more often a level is tested, the weaker it is.

For example, it took silver nearly seven years to break through the $ 18 resistance level.

Silver week schedule. Source: TradingView

Silver week schedule. Source: TradingView

The explosion lasted so long that the price of silver constantly bounced around the $ 18 level. However, the break at the $ 18 level resulted in a massive move as the rally continued towards the $ 30 level, a 60% increase since the breakout.

But even if that’s not a lot for cryptocurrency enthusiasts, it is a big step for commodity markets. Hence, breaking the $ 12,000 barrier should trigger a massive Bitcoin move, plus the fact that the first major obstacle is between $ 16,500 and $ 17,500.

Such a step will also bring about 50%.

In recent months, the US Dollar Currency Index has been at the center of much debate about Bitcoin’s movement.

It is quite clear that they are moving in opposite directions towards each other, which leads to the conclusion that the weak US dollar is distorting the price of bitcoin. This is also the main reason why large institutional investors take positions in bitcoin, and it is a strong signal that a new cycle is approaching.

In fact, the inverse correlation is quite simple and natural, since the world economy is built around the global reserve currency, the US dollar.

A prime example of the weakness of the US dollar is the reaction to gold following the 2000 internet bubble.

After the market crash that year, the US dollar lost its value, which led to a 600% rise in gold in the following years. During this period, up to 1100% of the silver was collected.

Likewise, when the US dollar began to show strength, gold and silver fell sharply as expected.

Consequently, since the recent weakness in the US dollar has led to a rally in commodity markets, this will also fuel the development of bitcoin in the coming years. This momentum is often classed by Bitcoin proponents as a “logout choice.”

The most likely scenario would be a structure that remains limited in scope with additional testing at lower levels.

There are several reasons for this scenario. Firstly, it is the general weakness in Ethereum in the fourth quarter, which led to the general weakness in the crypto market.

Overall, January is the ideal month for Ethereum and the markets. However, a hiatus in the quarter is unlikely given all the uncertainty surrounding the global economy at the moment.

The second argument is the conclusion that the market is still building a new cycle. By means of these constructions, the accumulation areas are determined, which create the speed for the next impulse movement.

Source: CoinTelegraph