- Bitcoin (BTC) regained ground during the week but failed to settle above critical resistance.
- The temporary improvement of the global market conditions boosted BTC recovery.
- The correlation between Bitcoin and the stock market will continue to weaken.
Most part of the week Bitcoin has been on the recovery path. Slowly but surely the coin left $6,500 behind and even tested waters above $7,000. However, the buyers failed to develop an upside momentum above the critical resistance and the coin returned to $6,900 by press time. In the recent seven days, BTC/USD has gained over 3%. In March, Bitcoin lost a quarter of its value.
What's going on in the market
Traditional markets have started a cautious recovery amid some progress in talks on production cuts. Brent tested area above $36 for the first time since March 12, while the US Dollar Index surpassed 100.00. The index is based on a basket of key currencies of America's major trading partners. Stock market stays in limbo, though the S&P 500 also took off from the ground amid general improvement.
However, the market is still vulnerable for further losses, while the recovery may prove to be no more than a dead-cat bounce. Russia and Saudi Arabia are not ready for a compromise as of yet. Moreover, the oil market is in a dire state due to the Coronavirus pandemic, and the production cuts can hardly compensate for the disappearing demand.
The correction on the stock markets is unsustainable in the long run as the economic indicators are set to worsen. Also, the companies will soon start publishing their financial results for Q1 that will reveal the real damage to the economy caused by global lockdowns.
Bitcoin parts ways with stocks
While positive momentum on the global markets might have served as an additional bullish trigger for Bitcoin, the correlation between the first digital coin and equity indices is decreasing. The trend is set to continue and may turn negative after all even though the cryptocurrency will continue gaining support from better market sentiments.
According to the hedge fund manager Mark Yusko, cash is always the king during market panic or liquidity crisis. However, Bitcoin is next in line to the throne. Once the economic shock wave is over, we will have to face the side effects of the toxic treatment we used to stop the global economy from an outright crash.
High inflation is inevitable after liquidity injections worth trillion dollars. It means the Bitcoin will have a chance to shine to the advantage as a deflationary asset with limited issuance. The cryptocurrency was invented as a response to the financial crisis of 2008, and now it is being stress-tested in a real-life environment.
BTC/USD: technical picture
Bitcoin needs to regain ground above $7,000 and settle in a new range in the nearest future. After a short period of consolidation between $7,000-$7,300, the coin will proceed to grow slowly towards the next critical barrier of $8,000-$8,200. This resistance area is created by a combination of SMA100 and SMA200 daily and 23.% Fibo retracement for the downside move from July 2019 high to December 2020 low. A sustainable move higher will unleash Bitcoin's bullish potential and create FOMO environment on the market.
Considering an upward-looking RSI on a daily chart, the bullish scenario looks likely; however, a failure to settle above $7,000 will worsen the short-term technical picture and lock BTC/USD in the previous range with the lower barrier at $6,500. Negative sentiments on global stock markets may limit bitcoin's recovery ahead of the weekend as traders might prefer to sit on the fence before the situation clarifies.
BTC/USD daily chart
The near-term trend remains bullish as long as the price stays above $6,500. Once it is out of the way, the sell-off is likely to gain traction with the next focus on $6,300 (SMA100 4-hour, the upside-looking trend line) and $6,000. This development will negate the bullish scenario and bring deeper correction on the table.
On the intraday charts, the RSI has reversed to the downside from the overbought levels, which means that the short-term bearish correction is a possibility.
BTC/USD 4-hour chart
The Forecast Poll showed a mixed picture as the expectations worsened on a weekly frame and improved slightly on a quarterly basis. While it means that the are more optimistic in the long-run, the price expectations are below $8,000 on all time frames. It means that Bitcoin may proceed with the recovery within the current range, while no explosive growth is expected.
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