The past few weeks have seen Bitcoin consolidate in a tight range between $8,000 and $10,000. Every attempt at breaking the range, in both directions, has been squarely rejected.
Yet analysts are starting to see an impending breakout in the upward direction, citing fundamental trends instead of the precarious technical situation.
Bitcoin could soon see a “significant move higher” due to this factor
With Bitcoin performing rather well as a global pandemic ravages the world and one of the worst economic recessions in modern history is expected, more and more eyes have landed on the cryptocurrency as a viable investment. Thus, many more have begun to postulate how it fits into macroeconomic trends.
Rob Koyfman, CEO and founder of markets data firm Koyfin and a former Goldman Sachs vice president, released an article on Jun. 15 outlining his thoughts on markets.
The core of the article is that the U.S. dollar is weakening — and may continue to weaken — as the Federal Reserve commits to unlimited quantitative easing to rectify the poor economic conditions:
“The Fed’s commitment to prolonged use of QE may represent a major turning point for the US Dollar. A break below [a close-by level] would confirm a major decline for the USD with implications across asset classes.”
Koyfman explained that the leading cryptocurrency could benefit from this potential scenario, writing that: “USD weakness may be a catalyst for Bitcoin breaking out to new highs.”
The expectations of a falling U.S. dollar come after Raoul Pal
Pal sees that as bullish for Bitcoin, as it would result in the fiat system “breaking” and the implementation of a “Non-US Dollar dominated currency system.”
Slow on-chain trends could combat bull case
There are on-chain trends that could temporarily combat the Bitcoin bull case.
Below is an image of the blockchain analytics firm IntoTheBlock‘s Bitcoin signal dashboard. Three out of the company’s seven core signals are currently printing “bearish” signs: net network growth, which tracks the momentum of the underlying Bitcoin blockchain; in the money, which tracks the profitability of BTC holders; and large transactions, which tracks the number of transactions above $100,000.
Adding to this, founder of blockchain data firm ByteTree Charlie Morris observed that Bitcoin is primed to move lower due to a “dire” on-chain situation:
“1-week network velocity down to 454%, 5-wk 556%. Tx value down, av tx size down, fees down, MRI shot to pieces. Why the lack of interest? Can’t see price holding up. Fair value <$7k,” Morris wrote.