Bitcoin's Recent Performance
Bitcoin's price dropped below $26,000 on May 25, marking a two-week low. The cryptocurrency fell 1.91% to $25,880 before regaining some ground, but its overall short-term correction trajectory remains in place. It's now trading around 15% below its 2023 peak of $31,000 that it achieved in April.
The Dollar's Influence on Bitcoin
A more robust dollar has dampened investors' enthusiasm for Bitcoin. On May 25, the U.S. Dollar Index (DXY), which compares the dollar's strength against a selection of top foreign currencies, rose to over 104 - its highest level in two months. This rise in the index, a 3.2% increase from its April low, contrasts with Bitcoin's performance over the same period.
The Safe Haven Appeal of the Dollar
The dollar's bounce-back has been buoyed this week by its reputation as a "haven" against market uncertainty. Factors driving this uncertainty include:
- U.S. debt ceiling negotiations.
- A brewing banking crisis.
- Questions about the future of the global economy.
With short-term Treasury note yields soaring, demand for non-yielding assets like Bitcoin may be lessened in the short term.
Bitcoin's Capital Outflow
Bitcoin funds have seen capital outflows exceeding $100 million in May, as per a weekly report from CoinShares.
Long-term Prospects for Bitcoin
However, all is still possible for the world's premier cryptocurrency. Technically speaking, Bitcoin retains its long-term bullish bias, holding the firm above its 200-week exponential moving average (200-week EMA) near $25,200. If the cryptocurrency rebounds from this point, it may have the $30,000-31,000 range in its sights for the next upward move. A high-volume move above this area could trigger a bullish cup-and-handle breakout setup, aiming for profit above $65,000 by late 2023 or early 2024. On the other hand, if Bitcoin breaks down below the 200-week EMA decisively, it risks dropping towards Bitcoin's multi-year ascending trendline support near $20,000 by the end of 2023, a roughly 25% drop from current levels.
