US dollar squeeze and $19K BTC: 5 Things to watch in Bitcoin this week

Published at: Nov. 23, 2020

Bitcoin (BTC) starts another week at near historic highs as the U.S. dollar continues to drop — what’s next?

With investors seeking safe havens and Bitcoin already seeing a demand squeeze, Cointelegraph covers the factors that could further shape price action this week.

DXY descends to familiar lows

News from the U.S. that mass vaccination against the Coronavirus may begin within a month has sent investors panicking for hedge assets.

With multiple candidates now available among potential vaccines, the mood is tending towards worldwide recovery emerging, which means the dollar becomes less appealing compared to other destinations.

“The vaccine news is favoring the view of a sooner-rather-than-later global economic recovery with the USD losing its safe haven appeal along the way,” Rodrigo Catril, a currency strategist at National Australia Bank, told Bloomberg.

“This is a risk-positive, USD-negative backdrop, especially with the Fed likely to remain ultra-dovish for some time.”

The U.S. dollar currency index (DXY), which tracks USD against a basket of twenty trading partner currencies, has fallen lows seen twice since August, with monthly losses totalling nearly 2.2%.

As Cointelegraph often reports, DXY tends to show an inverse correlation to Bitcoin, meaning protracted weakness comes in tandem with stronger BTC/USD performance.

The outlook for the dollar remains uncertain thanks also to the risk of fresh sanctions by the White House on Chinese tech firms, details of which are expected this week.

Supply squeeze “biggest story in Bitcoin”

Within Bitcoin, the emerging narrative that buyers are simply demanding more coins than can be produced continues.

As noted previously, this is being driven by corporate entities, notably Grayscale, Square’s Cash App and PayPal, with the requirements of all three only rising with time as more clients choose to buy BTC.

The result is that miners see their block subsidies snapped up, and the only way for the buy side to plug the gap is to pay higher prices per coin.

“PayPal and Cash App are already buying more than 100% of all newly-issued bitcoins,” investment firm Pantera Capital summarized in a blog post on Nov. 21.

“Where would Cash App get their coins? That’s where the finite-supply, inelasticity part comes in: At a higher price. That is THE story in Bitcoin right now.”

Pantera included a chart of volume from ItBit, the exchange run by Paxos, the payment handler covering PayPal’s new cryptocurrency feature. PayPal alone, it added, appears already to be buying 70% of all newly-mined bitcoins.

The new status quo differs markedly from the last time that Bitcoin traded at levels near $20,000. Unlike then, various figures argue, those buying this time are by definition in it for the long run.

“At $18.5K #Bitcoin Google searches for ‘bitcoin’ have not seen an uptick. This is not a FOMO rally. It's steady hands. Few understand this,” Gemini exchange co-founder Cameron Winklevoss tweeted on Monday.

Last week, comments from one traditional market strategist underlined the seeming lack of interest in Bitcoin from mainstream consumers. This, she told Bloomberg, had died in 2017.

Fundamentals stage a serious rebound

After its 4.82% increase last week, Bitcoin’s network difficulty is set to lead a resurgence in fundamentals in five days’ time.

Difficulty and its automatic readjustments — after every 2016 blocks — are an essential feature in Bitcoin allowing it to maintain constant block mining intervals without outside intervention and, thus, ensuring network stability. 

At the beginning of November, difficulty dropped by the most in nine years in a single readjustment. This created a more accessible playing field for miners, with the expectation that increased activity would make difficulty rise again thanks to the ensuing competition.

As such, at the end of this week, difficulty should bounce upwards by an estimated 7.7%, almost reversing the impact of the previous dip and opening the path to new all-time highs.

Likewise, Bitcoin’s average hash rate — the estimated computing power dedicated to validating transactions — has hit 137 exahashes per second (EH/s), rebounding 30% since the difficulty drop.

Seven-day average hash rate’s all-time high currently lies at 146 EH/s, this appearing in mid October.

PlanB: Big price gains are yet to come

Zooming out — even slightly — is still a cause for major bullishness among some of Bitcoin’s best-known analysts.

For PlanB, creator of the stock-to-flow-based series of price forecasting models, the real upside for Bitcoin is still yet to come, despite monthly gains already totalling 43%.

This is due to historical behavior after block subsidy halving events. In 2012 and 2016, upside ensued months after the halving, but serious gains came the following year — and looked more like a tsunami than a slowly increasing tide.

“Current #bitcoin price action is nice, but we are waiting for a real jump (like the red arrows early 2013 and 2017),” he tweeted alongside an annotated chart.

“IMO that will be the start of the real bull market, and indeed phase5. January 2021?”

As Cointelegraph reported, PlanB is far from alone in considering next year to be the return of Bitcoin’s halcyon days.

Fear & Greed slowly cools

A concerning counterargument to further gains for Bitcoin last week came in the form of worrying readings from the Crypto Fear & Greed Index.

Using a basket of factors to measure investor sentiment, the Index almost matched highs from 2019, which culminated in a significant price drop.

As of Monday, however, the metric’s current “extreme greed” rating of market sentiment is slowly beginning to ease off, dropping from 94/100 to 90/100.

“Extreme greed” refers to the rapidly deteriorating strength of investor resolve as prices increase, signalling the increasing likelihood of a sell-off.

Tags
Related Posts
Another $1 billion wipeout: Why is Bitcoin seeing extreme price moves?
Nearly $1 billion worth of Bitcoin (BTC) futures contracts were liquidated on Jan. 13, a day after the big shakeout. The continuous loop of liquidations is causing extreme volatility and large price swings in the cryptocurrency market. What are futures liquidations, and why are so many Bitcoin positions being liquidated? In the Bitcoin futures market, traders borrow additional capital to bet against or for Bitcoin. The technical term for this is leverage, and when traders use high leverage, the liquidation threshold gets tighter. For example, if a trader borrows 10 times the initial capital, a 10% price move to the …
Bitcoin / Jan. 13, 2021
Bitcoin sees record 100 days above $10K as one analyst eyes ‘parabolic’ 2021
Bitcoin (BTC) has officially beaten a new record as BTC/USD trades above $10,000 for 100 days, and major gains should come next. As voting in the United States’ presidential election ended on Nov. 3, Bitcoin saw a landmark moment of its own — 100 days straight trading in five figures. Bitcoin sees record stretch above $10,000 The achievement is not just impressive as a record for $10,000-plus prices. According to previous data, once Bitcoin trades above these significant price levels for 100 days, BTC/USD swiftly increases by an order of magnitude. As Cointelegraph reported last week, the length of time …
Adoption / Nov. 4, 2020
Crypto Markets in The Green, XRP Sees Major Boost Briefly Overtaking ETH by Market Cap
Tuesday, Nov. 6: top cryptocurrencies have seen strong gains on the day, with Ripple (XRP) temporarily overtaking Ethereum (ETH) as the top altcoin by market capitalization. Market visualization from Coin360 Bitcoin (BTC) is up 0.3 percent over the last 24 hours, and is trading at around $6,447 as of press time. Having briefly dipped below $6,400 during the day, BTC has rebounded and is pushing a slightly higher price point. BTC is still down 1.67 percent over the past 30 days. Bitcoin 7-day price chart. Source: CoinMarketCap ETH has seen some growth over the 24-hour period, up 3.64 percent from …
Bitcoin / Nov. 6, 2018
Bitcoin Price Stays Static at $8,800 as NEO, BNB Steal the Limelight
Bitcoin price (BTC) continued its daily trading pattern on Nov. 13, hovering just under $8,800 after losing support at $9,000. Cryptocurrency market daily overview. Source: Coin360 Bitcoin tracks sideways below $9K Data from Coin360 showed another lackluster day for BTC/USD, with little progress over the past 12 or 24 hours. The week had begun with Bitcoin losing its foothold higher up, exiting a trading corridor between $9,000 and $9,500 and so far failing to reclaim it. Bitcoin seven-day price chart. Source: Coin360 As Cointelegraph reported, analysts had remained broadly bullish on longer-term market prospects. Now, however, the short term could …
Bitcoin / Nov. 13, 2019
Bitcoin price reverses gains on New Year's Eve; hodlers continue stacking sats
Bitcoin (BTC) and the broader cryptocurrency market turned lower Friday afternoon, erasing intraday gains to cap off a highly successful year on a weaker note. Market Update The BTC price fell below $46,000 Friday and was last seen hovering below that level, according to data from Cointelegraph Markets Pro and TradingView. The flagship cryptocurrency is down 2.9% on the day to trade at $45,933. BTC's price is down more than 5% from the intraday peak. Altcoins faced a similar downward trajectory as Bitcoin, with the likes of Ether (ETH), Binance Coin (BNB) and Solana (SOL) each falling more than 2%. …
Bitcoin / Dec. 31, 2021