Bitcoin resumed its uptrend ahead of Monday’s New York meeting as traders weighed their risk opportunities against President Joe Biden’s stimulus plans and its possible bearish impact on the US dollar.
The flagship cryptocurrency regained $ 34,500 after rising 6.83 percent while its market cap topped $ 636 billion. The uptrend came after a depressive session on Friday and the weekend when the price fell to $ 28,372 at one point.
Bitcoin is rising amid weakening US dollar worries. Source: BTCUSD on TradingView.com
Bitcoin rises amid the US dollar's weakening woes. Source: BTCUSD on TradingView.com
Elsewhere in the crypto market, Ethereum exploded more than 21 percent, hitting a new record high of over $ 1,470. Other tokens, including Litecoin, Bitcoin Cash, and Binance Coin, also rose in the 5 to 6 percent range.
Overall, the cryptocurrency market has increased its reserves by $ 40 billion in the past 24 hours.
Bitcoin hits stimulus
Bitcoin’s profits came after Mr Biden signed two executive orders, one of which would increase spending on the federal nutritional aid program and streamline the provision of stimulus checks. The U.S. president plans to provide aid worth at least $ 1.9 trillion as the fallout caused by the coronavirus pandemic emerges.
Sentiment dampened demand for the safe US dollar, which weakened 0.2 percent overnight against the world’s leading foreign currencies. For the week that ended January 19, the net speculative short position on the greenback rose to its highest level in the past decade.
The US dollar index is pulling back after testing resistance near 90. Source DXY on TradingView.com
US dollar index pulls back after testing resistance near 90. Source DXY on TradingView.com
This further emphasized that market sentiment for the dollar is bearish. Thanks to the negative correlation since the coronavirus crash in March, Bitcoin’s popular anti-fiat narrative has been promoted among speculators.
“Expect maximum fiscal and monetary incentives until the current unemployment rate drops from 6.7 percent to 4 percent – still a long way to go,” said Dan Tapiro, co-founder of DTAP Capital. “Bitcoin and Gold are supported.”
Signs of further uptrend in Bitcoin are also evident in the form of the Federal Reserve’s meeting on Wednesday. There, the US Federal Reserve Chairman Jerome Powell expects that he has no plans to trace the Fed’s open bond purchase program and ultra-low interest rates.
“The process of reducing QE is likely to be a gradual process that could last through 2022 and possibly be followed by the first rate hikes later in 2023,” wrote Lee Hardman, currency analyst at MUFG.
“In these circumstances, we continue to believe that it is premature to expect the US dollar to recover in anticipation of future policy tightening and see scope for further weakness this year,” he added.
The prospect of a continued bearish US dollar also increased Bitcoin’s ability to hold $ 30,000 as a long-term support level. Large institutions like Grayscale Investments are increasing their Bitcoin reserves at roughly the same level.
“There is little doubt that the institutional flow impulse in Bitcoin distinguishes 2020 from 2017. And there is no better metric to capture this institutional impulse than the flow of the grayscale Bitcoin trust in Figure 6. “~ JPM pic.twitter.com/66ibPoTFEp
– Frank Chaparro (@fintechfrank) January 25, 2021
Bitcoin had an extended uptrend of over $ 35,000 at the time of going to press.