Analysts warn that a recovery of gold and the US dollar index could negatively affect Bitcoin’s upward momentum.
Dan Tapiero, co-founder of 10T Holdings, said weak hands were shaken in the gold market. This increases the likelihood of a gold rush in the near future, especially since it comes from an 80-day setback period.
A rebound in gold and the dollar can bring down the price of Bitcoin
Bitcoin has experienced strong momentum in the last three months, recently reaching an all-time high on Coinbase and other major exchanges.
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Despite this, the threat of a correction for Bitcoin is a real possibility if gold starts to rise in tandem with the US dollar.
The biggest gold outflows in three weeks. Source: Dan Tapiero, BofA
According to Tapiero, the largest three-week liquidation in gold market history increases the probability of an upward trend. He wrote:
„Very bullish for the #gold. The largest three-week liquidation has just occurred. Weak hands were cleaned up. USD 25 billion went to EM stocks, much more to US stocks. Only $8 billion was invested in gold. Perhaps a small amount in #bitcoin. #BTC is still not big enough to be a macro asset class… but very soon.
Some might consider the recovery of gold to be a positive factor for Bitcoin in the medium term. As more investors are beginning to recognize BTC as a store of value, an upward trend in gold could benefit cryptomoney.
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Still, there is a stronger case to be made and that is that Bitcoin’s rebound coincided with the big gold outflows, as reported by Cointelegraph. That means that a big gold rush could affect BTC’s momentum in the short term.
The parabolic upward trend of US stocks is another factor to consider
The US stock market continues to rise due to the unprecedented liquidity injected by the central bank. The combination of average inflation and financial easing conditions has been pushing stocks to record highs.
As a result, Jan Nieuwenhuijs, independent financial researcher for The Gold Observer, reported that US stocks had their best month since 1987.
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There is a possibility that the continued upward trend in U.S. stocks will make other risky assets less attractive in the short term. It could also make BTC a less urgent operation for retail and institutional investors in the near future.
Currently, many traders believe that Bitcoin is at risk of a deeper decline to USD 18,600 following its recent rejection.
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Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said that the fall of BTC from USD 19,100 with a strong reaction from sellers makes a deeper fall likely. He wrote:
He wrote: „It could not get above USD 19,400 as the crucial switch, after which there was a fall towards USD 18,800. The USD 19,100 area was instantly rejected and the probability of a fall towards USD 18,600 increases“.
Bitcoin (BTC) is at risk of a reversal as analysts anticipate that gold will make a big recovery. The precious metal has underperformed BTC in recent weeks, as the market-leading cryptomoney has experienced a rebound led by growing institutional interest.