The US dollar is starting to weaken again as sellers push the US dollar index (DXY) down, which could boost Bitcoin’s (BTC) momentum in the short term.
Alternative assets like bitcoin and gold are valued against the dollar. Often times, when the DXY begins to fall, it causes BTC to rebound against the dollar.
BTC / USD (orange) vs. DXY (green). Source: trade view
The dollar’s share of global reserves is falling rapidly
According to Holger Zschaepitz, market analyst at Welt, the share of the US dollar in global reserves is falling rapidly as countries like Russia pursue a strategy of de-dollarization and opt for gold.
When the pandemic was proclaimed in Q1 2020, demand for the dollar spiked as investors fled to cash as it is the global reserve currency.
However, due to various factors including the presidential election and the negative outlook for COVID last year, the dollar struggled to outperform other currencies such as the Japanese yen and Swiss franc.
“OOPS! Dollar declining. While the dollar’s share of global reserves initially increased at the start of the pandemic, it has declined since then and is now only 59% – 1.5 percentage points down from the previous quarter and the lowest since 1995. Part of the decline due to devaluations, but also due to active USD sales. “
If the US dollar continues to decline, there is a high chance that Bitcoin will continue to recover in April.
In the past, April has been a strong month for Bitcoin for the past decade and has seen positive gains for five consecutive years since 2016.
April is a good month for #Bitcoin
– Bitcoin Archive (@BTC_Archive) March 29, 2021
Additionally, Danny Scott, the CEO of Bitcoin exchange CoinCorner, said the law of averages put bitcoin at $ 83,000 in April. He wrote:
“The average law gives #Bitcoin a target price of $ 83,000 for April. 10-year average in April + 51%.”
Miners seem to be amassing bitcoin
Lex Moskoviski, the CIO of Moskoviski Capital, pointed out the macro factors favorable to Bitcoin, noting that miners have recently started replenishing their BTC holdings.
In a single day, the miners added 4,380 bitcoin, which the quantitative trader and investor called a growing trend. He said:
“The miners have really built up their positions. 4,494 #Bitcoins were stacked in total today. Another 4,380 #Bitcoins were stacked by miners yesterday. Looks like a trend indeed.”Change in the net position of the BTC miner. Source: Glassnode
When miners sell their stocks, Bitcoin usually sees a retreat as it can cause heavily leveraged orders in the futures market to see cascading liquidations.
With miners hoarding Bitcoin and piling BTC with expectations that the cryptocurrency will appreciate, the likelihood of a major sell-off diminishes for the foreseeable future.
In the near future, it remains crucial that Bitcoin stays above the USD 58,000 support area. If it continues to consolidate above it, the likelihood of a major breakout above the $ 60,000 resistance level increases significantly.