While Bitcoin faces the major technical resistance of $31,000, it is again correlation factors that will decide the continuation of the trend, finally making it possible to decide between failure and the end of a bear market below 31. $36,000 or acceleration of the yearly uptrend towards $36,000. These correlation factors are acting in the wake of the US inflation update this week.
The fundamental key is the US dollar following inflation this week
How to achieve the preservation of the annual upward trend in the price of BTC, more than 80% rebound since last January, accompanied by a sharp increase in the dominance of BTC? It is this question that the technico-fundamental analyst that I am claims to answer.
Facing the dimension of the $31,000 resistance (probably the last string in the bow of the bear camp, the one that has long been targeting $12,000), BTC needs support from all of its cross-asset factors to hope for a breakout.
Within all the parameters that have a positive or inverse correlation effect on the price of bitcoin, let’s keep in mind that two have a very powerful and structuring impact on the underlying trend of bitcoin:
- The inverse correlation with the trend of the US dollar against a basket of major currencies ;
- The inverse correlation with nominal and real interest rates in the credit market.
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The first graph below illustrates this negative correlation, recalling in particular that it had played a crucial role in triggering the bear market from November 2021.
And it is precisely this week that the US dollar (DXY) and US market interest rates are immediately impacted by updated US inflation figures. While the consumer inflation rate (CPI) fell to 3% in its nominal version, the underlying version is still too high, but has finally taken a downward turn, falling to 4.8%. Thursday’s Producer Price Update (PPI) is expected to put downward pressure on the US Dollar with factory gate price growth approaching zero year-on-year.
Whatever happens, it is essential, if not imperative, that the US Dollar establishes a new yearly low to consider that the price of bitcoin is able to overcome the resistance at $ 31,000.. As for market bond rates, they must remain below the levels that triggered the crisis of American regional banks at the beginning of last March.
Bitcoin Price in Weekly Data with Dollar (DXY) Forex Trend and US 2-Year Bond Interest Rate
The decision will soon be made vis-à-vis the pivotal resistance of $31,000.
For the past 3 weeks, the proximity of major resistance at $31,000 has been the dominant technical factor in the crypto market. Remember that this chartist obstacle represents the last valid argument of permabears, those who live in the greatest frustration of not having seen their target of 12,000 dollars reached in the wake of the bankruptcy of FTX in the fall of 2022.
In order to break through such resistance, only a close on the weekly time horizon can constitute an overflow signal, which would then engage the target of $36,000, the highest selling liquidity in the market.
Closing price in weekly data of Bitcoin with the measure of its short-term volatility
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Chart source: Trading View
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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