Bitcoin (BTC) price has been showing impressive strength in the previous weeks and today the price made a new 2020 high at $13,666.
This momentum was made alongside weakness in the U.S. dollar and many analysts believe that as long as the dollar remains weak, Bitcoin and other safe-haven assets will do well.
However, as Bitcoin shows strength, altcoins are failing to follow suit and most altcoins are selling off against BTC. Bitcoin’s dominance rate has been rising in the previous weeks and this shows that the market’s momentum is based around Bitcoin.
Traders expect resistance between $13,500-$14,000
BTC/USD 1-week chart. Source: TradingView
The weekly chart shows a clear resistance zone between $13,500-$14,250 as the next big hurdle for the markets.
The price of Bitcoin broke through the $11,600-$12,000 barrier as the crucial barrier for further upward movement. This breakthrough caused the price to continue rallying toward the next hurdle, which is between $13,500-$14,250.
It’s not likely to anticipate an apparent breakthrough in one-go as it’s the first test of this resistance zone, but the overall weakness of the dollar is signaling that the price of Bitcoin could only run higher.
U.S. dollar weakness is propelling the Bitcoin rally
U.S. Dollar Currency Index 1-day chart. Source: TradingView
The U.S. Dollar Currency Index (DXY) is currenlty showing significant weakness after the last test of the 94.6 points level was instantly rejected.
This rejection caused DXY to drop down further. More importantly, since the rejection occurred on Sept. 24, Bitcoin’s price started to rally.
This rally increased the price of Bitcoin by $3,000 as it rallied from $10,500 to $13,500. The correlation between DXY and Bitcoin has increased since the March crash and this is an inverse correlation.
If the dollar holds the 92.50 area for support, there’s a potential likelihood of a reversal on the price of Bitcoin as well. This would mean a correction in the crypto markets, which isn’t bearish at all.
Total market cap still faces resistance
Crypto market cap 1-week chart. Source: TradingView
The crypto total market capitalization is lagging behind Bitcoin’s strength, as BTC is the only one showing strength recently. This means that altcoins are seeing a selloff in their BTC pairings, further showing that Bitcoin is currently more robust than altcoins.
Currently the total market capitalization is in a massive resistance zone, as the $400-$410 billion level is a crucial pivot.
A breakthrough in this resistance zone would mean continuation to $520-$530 billion is likely to occur.
A rejection here would mean a further range-bound construction, through which the $280-$300 billion areas is a significant support zone to hold.
Potential scenario for Bitcoin
BTC/USDT 3-hour chart. Source: TradingView
The primary pivot for Bitcoin right now is whether it can hold the $13,000-$13,200 area for support. If that area warrants support, then the recent breakout can’t be classified as deviation above the range high.
However, if Bitcoin’s price fakes out above $13,500 and drops back into the range, the deviation is confirmed by a bearish retest of the $13,000-$13,200 area.
If this scenario plays out the way it should, retests of $12,500 and potentially $12,000 or $11,600 are on the tables.
Obviously, such a move is lining up with a potential reversal on the U.S. Dollar Currency Index and the failure of Bitcoin to breakout above $14,000.
Once again, such a retest is not bearish. It’s very healthy to test previous resistance levels for support before continuation to the upside can occur.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.