Bitcoin capitalized on the ongoing risk-on sentiment on Tuesday as its price surged past the $35,000-level.
The benchmark cryptocurrency established an intraday high of $35,649 during the early European session. Its move uphill also pushed the prices above a short-term resistance level defined by the 20-day exponential moving average. The coin holds the history of logging interim bull runs while maintaining the 20-DMA as support.
As Bitcoin holds its support, it eyed a retest of the resistance trendline that constitutes a Falling Wedge pattern in conjugation with a descending support trendline below. In retrospect, Falling Wedges are bullish reversal patterns that begin wide at the top but contract as the price moves lower.
A bullish confirmation on the pattern does not come until the price breaks above the resistance line while accompanying higher volumes. That confirms a breakout towards a price target that is as big as the maximum distance between the Wedge’s upper and lower trendlines.
If Bitcoin’s current Falling Wedge pattern holds well, the cryptocurrency could breakout towards the $50,000.
Bitcoin’s latest uptick borrows cues from a string of bullish catalysts, including Tesla and SpaceX founder Elon Musk’s endorsement of the cryptocurrency on his Twitter bio and visible bipartisan efforts in the United States to pass the third coronavirus stimulus package.
Both fundamentals connect one another. Corporate tycoons like Elon Musk prefer Bitcoin because they hold billions of dollars worth of cash reserves. Their fear of the US dollar losing its purchasing power prompts them to dump their cash for alternative assets. Bitcoin, a scarcer asset, serves as a hedging instrument in such a scenario.
Of late, payment firm Square and software company MicroStrategy are among the biggest corporates that have converted a good portion of their dollar wealth into Bitcoin. With Mr. Musk now promoting Bitcoin openly, analysts believe he too would take a similar call for his two companies.
But why would the dollar fall? The reason is the US government’s relentless efforts to aid Americans to walk through economic issues caused by the coronavirus pandemic. US president Joe Biden has proposed a $1.9 trillion stimulus package for the same cause, but a group of Republican senators want to tone down the aid by a third.
Investors realize that the US economy will see the third stimulus package in one way or the other. That would put an additional burden on the dollar as it competes against a basket of top foreign currencies. Bitcoin could benefit hugely from such a scenario.